Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

Subject: Program Integrity Issues

Publication Date: March 22, 2013

Posted Date: March 22, 2013

Subject: Program Integrity Issues

FR Type: Notice

[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Rules and Regulations]
[Pages 17598-17600]
From the Federal Register Online via the Government Printing Office []
[FR Doc No: 2013-06656]



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; revisions to preamble.


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 Education Act of 1965, 
as amended (HEA) (October 29, 2010, final regulations). This document 
revises the preamble discussion to the October 29, 2010, final 
regulations in accordance with the remand in Association of Private 
Sector Colleges and Universities v. Duncan (D.C. Cir. 2012).

DATES: These revisions apply to the preamble for the October 29, 2010, 
regulations (75 FR 66832), which were generally effective July 1, 2011.

FOR FURTHER INFORMATION CONTACT: Marty Guthrie, U.S. Department of 
Education, 1990 K Street NW., Room 8042, Washington, DC 20006. 
Telephone: (202) 219-7031 or by email at
    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 National Science and Mathematics Access 
to Retain Talent Grant (National Smart Grant) Programs. This document 
revises the preamble discussion to the October 29, 2010, final 
regulations in accordance with the remand in Association of Private 
Sector Colleges and Universities v. Duncan, 681 F.3d 427 (D.C. Cir. 
    We note that the Court in APSCU v. Duncan, also remanded certain 
provisions of the Department's misrepresentation regulations for 
revision consistent with the Court's opinion. We will be publishing a 
separate notice in the Federal Register addressing this issue.

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:
    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:
    Specifically, through the advanced search feature at this site, you 
can limit your search to documents published by the Department.

[[Page 17599]]

Revisions to the Preamble of the Final Rule

Current Safe Harbors

    We are revising our response to the third comment under the Current 
Safe Harbors heading. Our discussion and response to this comment that 
begins in the first column on page 66874 is revised as follows:
    ``Discussion: The Department believes that an institution's 
resolute and ongoing goal should be for its students to complete their 
educational programs. Employees should not be rewarded beyond their 
standard salary or wages for their contributions to this fundamental 
    The safe harbor in Sec.  668.14(b)(22)(ii)(E), as promulgated on 
November 1, 2002 (67 FR 67048), permits compensation based upon 
students successfully completing their educational programs or one 
academic year of their educational programs, whichever is shorter. 
However, as we discussed in the NPRM, it is the Department's experience 
that institutions use this safe harbor to provide recruiters with 
compensation that is "indirectly" based upon securing enrollments in 
violation of the HEA. 20 U.S.C. 1094(a)(20) ("The institution will not 
provide any commission, bonus, or other incentive payment based 
directly or indirectly on success in securing enrollments or financial 
aid to any persons or entities engaged in any student recruiting or 
admission activities or in making decisions regarding the award of 
student financial assistance. * * *") In other words, because a 
student cannot successfully complete an educational program without 
first enrolling in the program, the compensation for securing program 
completion requires the student's enrollment as a necessary preliminary 
    This is particularly the case with short-term, accelerated 
programs, where the Department was advised in comments received during 
and following the November 2009 Negotiated Rulemaking Meeting that 
there is the potential for increased efforts by institutions to rely 
upon this safe harbor to provide incentives to recruiters. Concern over 
recruiters guiding students to short-term programs was not as prominent 
when the safe harbor was adopted in 2002 because the number of such 
programs was not as widespread then, having grown dramatically in more 
recent years. The shorter the program, the more likely the student will 
complete the program, thus rewarding enrollment and completion 
notwithstanding the student's academic performance or the quality of 
the program. We are also concerned that, if this safe harbor is not 
removed, recruiters will steer students to the shortest possible 
programs regardless of whether the programs are appropriate for the 
students, or to an even smaller number of program options where the 
recruiter believes completion is most likely to be obtained. As the 
primary function of admissions representatives is to serve as 
counselors, their primary goal should be to make sure that the student 
is a good fit for the institution and the program, to make sure that 
the institution and program are a good fit for the student, and not to 
enroll the student if this is not the case. A decision by a recruiter 
not to enroll a student should be considered every bit as valuable to 
the institution as a decision to enroll the student, if, in fact, the 
student and the institution or the program are not a good match.
    As discussed in the NPRM, the Department also is aware of schools 
that have devised and operated grading policies that all but ensure 
that students who enroll will graduate, regardless of their academic 
performance. Thus, as explained in comments received during and 
following the November 2009 Negotiated Rulemaking Meeting, the 
Department believes that retaining this safe harbor could contribute to 
lowered admissions standards, misrepresented program offerings, lowered 
academic progress standards, altered attendance records, and a lack of 
meaningful emphasis on academic performance and program quality. We 
also note that recruiters are aware that many of the schools that would 
be most affected by the removal of the safe harbor have poor completion 
rates--approximately 10 to 25 percent.
    As a result, if the safe harbor were retained, in order for 
recruiters to secure incentive compensation, they would likely need to 
enroll even more marginal students, and make even greater unfounded 
claims about a program, to increase the potential that some will 
actually complete their programs of instruction. And, of course, there 
is the further potential for unscrupulous actors to manipulate the 
process to obtain student completions, through grade or attendance 
    Accordingly, this safe harbor ultimately does not benefit students, 
and because institutions have sufficient reasons to value student 
retention and completion without providing incentives to recruiters, we 
believe it is appropriate to remove the safe harbor.
    We disagree with the commenter who stated that removal of this safe 
harbor is inconsistent with the Administration's goal of increasing 
student retention in postsecondary education. Institutions should not 
need this safe harbor to demonstrate their commitment to retaining 
students within their program of instruction.
    We disagree with the commenters who indicated that incentive 
payments under this safe harbor have a positive effect on a student's 
educational experience. There is nothing about the making of incentive 
payments to recruiters based upon student retention that enhances the 
quality of a student's educational experience or makes it more likely a 
student will complete a program. If the program of instruction has 
value and is appropriate for a student's needs, a student will likely 
enjoy a positive educational experience regardless of the manner in 
which the student's recruiter is compensated, whereas retention bonuses 
can cause recruiters to pressure students to remain enrolled even when 
a student is dissatisfied with a program or is eligible for a refund of 
charges paid. Rather than providing a benefit by bolstering the quality 
of students that are enrolled, retention of the safe harbor is likely 
to perpetuate abuses by fostering enrollment and retention in programs 
that do not best reflect a student's needs or desires, but are designed 
to secure completion of the programs at all costs.
    Finally, the removal of this safe harbor would not permit payments 
based on a student's employment in the field of study after graduation. 
Here again, the potential for manipulation and abuse is significant. 
The Department's experience has shown that some institutions pay 
incentive compensation to recruiters based upon claims that the 
students whom the recruiter enrolled graduated and received jobs in 
their fields of study. Yet, included among the abuses the Department 
has witnessed, for example, is a circumstance where the institution 
counted a student who studied culinary arts and was working in an 
entry-level position in the fast food industry as being employed in his 
field of study. Such a position did not require the student to purchase 
a higher education 'credential.' As a result, we believe that paying 
bonuses to recruiters based upon retention, completion, graduation, or 
placement should be considered to violate the HEA's prohibition on the 
payment of incentive compensation."
    We are also amending our response to the fourth comment under the 
Current Safe Harbors heading. Our discussion and response to this 
comment found in the third column on page 66874 is amended by adding 
the following after the second paragraph of our discussion:

[[Page 17600]]

    "In further response to commenters' questions about whether an 
institution could provide incentive compensation to employees in 
college diversity offices who recruit minority students, we note that 
the HEA prohibits all direct or indirect payments of incentive 
compensation to personnel or staff engaged in student recruitment and 
does not distinguish between incentives for personnel or staff 
recruitment actions that could have certain effects, e.g., recruitment 
of a well-qualified or diverse student body. The prohibition thus 
includes a prohibition on paying incentive compensation for efforts to 
promote diversity at an institution. The Department's objective in 
removing all of the safe harbors is to separate the meritorious 
performance of all employees from an enrollment-based compensation 
system, consistent with the statute's language, regardless of what the 
purpose of the enrollment might be.
    We also wish to reiterate that the incentive compensation 
prohibition is designed to protect all students from receiving undue 
pressure to enroll or to graduate. The statute and the implementing 
regulations ban all compensation to persons and entities that directly 
or indirectly provide an incentive to encourage enrollment. The 
incentive compensation ban is designed, among other things, to keep 
students of all races and backgrounds from being urged or cajoled into 
enrolling in a program that will not best meet their needs. Minority 
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.
    In point of fact, there never was a safe harbor addressing minority 
recruitment; neither the prior regulations nor these regulations 
provided a change in this area. Institutions are encouraged to continue 
to enroll all students in programs of instruction that are designed to 
promote their academic achievement and occupational success. We believe 
our regulations encourage and support this outcome.''

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 

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 

34 CFR Part 691

    Colleges and universities, Elementary and secondary education, 
Grant programs--education, Student aid.

    Dated: March 18, 2013.
Arne Duncan,
Secretary of Education.
[FR Doc. 2013-06656 Filed 3-21-13; 8:45 am]

Last Modified: 03/21/2013