On July 1 of this year, for institutions participating in the Title IV federal student aid program, a new law will go into effect eliminating any compensation to college personnel specifically based on the enrollment or continued enrollment of a student. This law arises primarily from compensation and promotion practices of at a number of for-profit universities, but also stems from practices at some not-for-profit institutions as well. As a result, the new regulations have implications for admissions and financial aid offices throughout higher education.
A little background: In 1992, changes to the Higher Education Act forbid colleges and universities from offering any bonuses, commissions, or incentive payments to employees based on enrollment or financial aid goals. In 2002, this ban was revised and 12 “safe harbors” were created, allowing some compensation for enrollment or financial aid performance of an institution. During the last couple of years, as violations were confirmed at 31 college institutions, the federal government moved to eliminate these safe harbor exceptions.
What does that mean for colleges and universities? Can campuses reward employees who meet enrollment and financial aid goals? The answer is a bit complex and includes a number of gray areas, and while campuses have some leeway in terms of salary and merit increases, they will have to be very careful to avoid tying such compensation directly to enrollment or financial aid results. This is especially a departure for many campuses that have included territorial goal achievement as part of an admissions counselor’s performance review.
Please note: The following is our interpretation as enrollment consultants of the new restrictions and potential opportunities for campuses regarding the new law. It is not a legal evaluation of the law, and you may wish to seek legal counsel before enacting future compensation measures that involve enrollment or performance metrics.
First, the law “will ban the use of commissions, bonuses, and other direct forms of compensation based on success in securing enrollments or the award of financial aid.” The Department of Education believes that an institution can determine if a payment of compensation is permissible by asking these two questions:
- Whether it is a commission, bonus, or other incentive payment, defined as an award of a sum of money or something of value paid to or given to a person or entity for services rendered; and
- Whether the commission, bonus, or other incentive payment is provided to any person based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, which are defined as activities engaged in for the purpose of the admission or matriculation of students for any period of time or the award of financial aid.
A “yes” answer to both of these questions would prohibit the commission, bonus, or incentive payment to the institution’s team member.
With bonuses and incentive payments being forbidden, are there other ways to recognize and reward campus personnel who work in admissions and financial aid? Yes, although with restrictions. The Department of Education states that “institutions often maintain a hierarchy of recruitment personnel with different amounts of responsibility.” As long as an institution complies with the new law, it may be appropriate for an institution to have salary scales that reflect an added amount of responsibility. For example, an entering admissions counselor’s sole responsibility in their first year might be to manage and work a territory, while in the second year the campus visit program would be added to the territory responsibilities. Institutions also remain free to promote (and demote) recruitment personnel, as long as these decisions are consistent with the Higher Education Act’s prohibition on the payment of incentive compensation.
Finally, regarding salary adjustments, campuses “may make merit-based adjustments to employee compensation provided that such adjustments are not based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid.” The Department of Education also will be revising the final regulations to state, “an employee who receives multiple compensation adjustments in a calendar year is considered to have received adjustments based upon success in securing enrollments or the award of financial aid in violation of the incentive compensation ban.” Our interpretation is that means an employee cannot receive more than one adjustment each year.
The bottom line is that while the ultimate expectation for employees in admissions and financial aid is for an institution to meet its enrollment goal, campuses will have to set this aside when they create expectations and evaluate the performances of their team. Essentially, employees cannot be judged based on whether they meet an individual or team enrollment goal.
If enrollment results for individuals cannot be included in an evaluation, what metrics could a campus therefore use to determine promotions or merit increases? Given that the law prohibits compensation based on enrollments, campuses may have some leeway in using other metrics such as the number of phone calls, contacts, etc., since these would not result in compensation for a specific individual number of students enrolling, but would contribute to an overall office goal. Some of our campus partners use methods such as:
- Performance appraisals for new student enrollment teams;
- Items such as professionalism, presentation skills, contributing member of a larger team, etc.
- Daily/weekly work goals for number of phone calls made, high school visits and college fairs conducted, electronic communications and blogs; and
- Very general evaluations such as contributing to the goals of the campus.
According to the Department of Education, they do not plan to provide “private guidance” on compensation questions. However, given the complexity and importance of this issue, we recommend that you contact your regional Department of Education for clarification on any regulation. In addition, we highly encourage institutions to use NASFAA’s “Ask Regs” service on their Web site. They can offer excellent advice on regulatory issues.
We also would be happy to discuss this issue with you. Feel free to leave a comment below or e-mail us. It’s very important to find a happy medium between meeting your legal obligations while still finding fair and logical ways to evaluate and compensate your admissions and financial aid staff.
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