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Incentive Comp, Disclosures &
How To Keep Admissions Compliant
Ritzert & Leyton, PC
Stephen T. Chema. Esq.
Steven M. Gombos, Esq.
• The views expressed in this presentation and its
accompanying materials are those of the speaker,
and do not necessarily reflect those of Private
Career Colleges.
• The contents of this presentation and its
accompanying materials do not constitute legal or
regulatory advice. No one should act or refrain
from acting on the basis of this presentation
without seeking individualized, professional
counsel as appropriate.
Ritzert & Leyton, PC
• This session focuses on the admissions and
recruiting practices and is designed to provide
school owners and administrators with a brief
discussion of applicable law and to provide insight
into some basic strategies for compliance with:
– The Incentive Compensation Rule
– Mandatory Public Disclosures
– Misrepresentation
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Incentive Compensation
• Rule prevents payment of “any commission, bonus, or
other incentive payment based in any part, directly or
indirectly, upon success in securing enrolment, or the
award of financial aid”.
• Any person engaged in any student recruitment or
admissions activity is a covered person under the rule.
• Commission, bonus, or other incentive payment =
money or something of value, other than a fixed salary
or wages, paid to or given to a person or entity for
services rendered.
• Prior “safe harbors” have been eliminated.
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Incentive Compensation
• What you already knew: Admissions Reps are
Covered Activities
Exempt Activities
Activities that are ALWAYS subject to the
ban on incentive compensation
Activities not subject to the ban on incentive
compensation include the following, unless
the activities of the employee or entity also
involve a covered activity.
Recruitment activities, including:
Marketing Activities, including:
Targeted information dissemination to
Solicitations to individuals;
Contacting potential enrollment applicants;
aiding students in filling out enrollment
application information
Broad information dissemination;
Advertising programs that disseminate
information to groups of potential students;
Collecting contact information;
Screening pre-enrollment information to
determine whether a prospective student
meets the requirements that an institution
has established for enrollment in an
academic program;
Determining whether an enrollment application
is materially complete, as long as the
enrollment decision remains with the
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Incentive Compensation
• Also covered: any higher level employee with
responsibility for recruitment or admissions of
– Director of Admissions
– Senior Management (V.P. of Admissions, Campus
Directors/Presidents, etc.) depending on the nature of
their activities
• Policy decisions related to the manner in which recruitment,
enrollment, or financial aid will be pursued or provided = exempt
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Incentive Compensation
• How can an institution implement a compliant
compensation plan for Admissions?
– Under the rule, institutions are still permitted to make 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.
• Standard evaluative factors: job knowledge, professionalism,
analytic ability, initiative in work improvement, clarity in
communications, use & understanding of technology, accuracy,
thoroughness, dependability, punctuality, adaptability, peer rankings,
student evaluations, and interpersonal relations.
– Two salary adjustments in a 12 month period is prima facie
evidence of a violation.
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Incentive Compensation
“The Department has been repeatedly advised by institutional
employees that these other qualitative factors are not really
considered when compensation decisions are made, and that
they are identified only to create the appearance of title IV
compliance. It is clear from this information that institutions are
making actual compensation decisions based exclusively on
the numbers of students enrolled.” 75 FR 66873.
“To be sure, any enforcement action by the Department will
require examination of the relevant documents and evidence”
– Government’s brief on appeal, APSCU v Arne Duncan.
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Incentive Compensation
• Establishing a compliant compensation plan is only
half the battle. You must apply the plan
consistently to all admissions employees and you
must carefully document the basis of all your
compensation decisions.
• Monitor and review the salary review process while
it is ongoing.
• Regularly analyze the results from your salary
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Incentive Compensation
• Additional ideas to consider:
– Employer contributions to profit sharing plans such as
401(k) plans which are made to individuals on a basis
that is neutral with respect to the role the recipient plays
in student recruitment
– Employee benefits plans offered to all employees on a
basis that is neutral with respect to the role the recipient
plays in student recruitment
– Compensation adjustments based upon seniority
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• There are an abundance of required disclosures
that are aimed at prospective students. (We have
identified over 33 different categories of required
disclosures for Title IV institutions generally.)
• 668.41 definition of prospective student: an
individual who has contacted an eligible institution
requesting information concerning admission to
that institution.
• As the main point-of-contact with prospective
students, admissions reps need to know, at
minimum, how to provide required disclosures.
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• Depending on which disclosure is involved, the
Department requires institutions either to:
– Provide the required disclosure, e.g. – hand a packet of
information to prospective student at an interview; or
– Make the information contained in the disclosure
available to prospective students. i.e., print in school
publications, mailings, or post on the school’s website.
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• Examples of disclosures which must be made
directly to a prospective student:
– Gainful Employment Disclosures
Occupations & SOC Codes
On-time graduation rate
Tuition & fees
Placement Rates
Median loan debts
– Campus Crime Notice
• A notice of the report’s availability
• Description of the contents
• Information on how to request a copy (including URL if posted online).
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• Examples of disclosures which must be made
available to a prospective student:
– Institutional Cost of Attendance & Additional Cost of a program in
which the prospective student expresses interest
– Refund & R2T4 Policies
– Academic/Program Information
– Institutional Policy Regarding Copyright Infringement
– Description services and facilities available to students with
– Transfer of Credit Policies
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• Schools should annually audit their disclosures to
make sure:
– Is the information accurate and up to date?
– Are the School’s disclosures delivered the correct way?
• E.g., are GE disclosures given to all prospective students and
appropriately posted on the website and included on promotional
– Are admissions personnel conversant with the content of the
• Can they answer basic questions about the information?
– E.g., can they interpret the School’s net price calculator for a student who has
questions about it?
• Do they know to whom they can refer questions that they do not
know how to answer?
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• Failure to provide (or make available) required
disclosures impacts on an institution’s
administrative capability and worse…
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• 34 CFR 668 Subpart F prohibits institutions from
making a “substantial misrepresentation” about the
nature of its educational program, financial
charges, employability of graduates, or relationship
with ED.
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• The regulation provides for a variety of sanctions:
– Revocation of school’s PPA
– Limitations on school’s participation in Title IV
– Denial of participation applications made on behalf of the
– Fine or Termination actions
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“Any false, erroneous or misleading statement an eligible institution,
one of its representatives, or any ineligible institution, organization,
or person with whom the eligible institution has an agreement to
provide educational programs, or to provide marketing, advertising,
recruiting or admissions services makes directly or indirectly to a
student, prospective student or any member of the public, or to an
accrediting agency, to a State agency, or to the Secretary. A
misleading statement includes any statement that has the likelihood
or tendency to deceive or confuse. A statement is any
communication made in writing, visually, orally, or through other
means. Misrepresentation includes the dissemination of a student
endorsement or testimonial that a student gives either under duress
or because the institution required the student to make such an
endorsement or testimonial to participate in a program.”
34 C.F.R. § 668.71(c).
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• The definition is extremely broad and can describe
“innocent” conduct of the institution.
– Can include statements that are inaccurate or confusing but does
not require that the speaker intended to make a misrepresentation.
• The definition of prospective student is also broadened, for
the purposes of the misrepresentation regulation:
– Prospective student: “Any individual who has contacted an eligible
institution for the purpose of requesting information about enrolling
in the institution or who has been contacted directly by the institution
through advertising about enrolling at the institution.
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Misrepresentations Related to the Nature of an Educational Program can involve
(among other things):
Accreditation (Type, Nature, Status)
Transferability of credits
Whether successful completion of course qualifies student for union membership, licensure or
certification, or meets conditions generally needed to secure employment in the occupation
Requirements for completion of the program (including grounds for terminating enrollment).
Availability, frequency, and appropriateness of courses and programs to employment objectives
Nature, age, and availability of training devices or equipment
Availability of part-time employment or other forms of financial assistance
Nature and availability of any tutorial or other supplementary assistance needed before, during or after
course completion
Nature or extent of any prerequisites for enrollment in any course
Subject matter, content of course of study, or any other fact related to the credential awarded upon
completion of course of study
Whether academic, professional, or occupational degree conferred has been authorized by appropriate
State agency
Matters required to be disclosed under 34 C.F.R. 668.42 (Financial Aid) & 668.43 (School Information)
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Misrepresentations Related to the Nature of
Financial Charges can involve:
Offers of scholarships
Whether particular charge is customary charge
Cost of program and refund policy
Availability or nature of financial assistance
Duty to repay loans regardless of whether student completes
program or obtains employment
• Student’s right to reject financial aid or other assistance or
whether student must apply for particular type of aid
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Misrepresentations Related to the Nature of Employability of
Graduates can involve:
Institution’s relationship with any organization, employment agency, or other
agency providing authorized training leading directly to employment
Institution’s plans to maintain placement services for graduates or otherwise
assist in obtaining employment
Institution’s knowledge about current or likely future conditions, compensation,
or employment opportunities in industry
Whether employment is being offered by institution or that a talent hunt/contest
is being conducted
Government job statistics in relation to potential placement
Other requirements generally needed to be employed:
– commercial driving licenses
– license to carry firearms
– failing to disclose factors that would prevent applicant from qualifying for such
requirements, such as existing prior criminal record or preexisting medical conditions
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Misrepresentations Related to the Nature of the
Relationship with ED can involve:
• Statements made by school or third-party describing School’s
educational content or programs in a manner suggesting
approval or endorsement by ED.
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Because the scope of the misrepresentation rule
has become so broad, and because of the
potentially severe nature of the Department’s
sanctions, schools must have a proactive
compliance strategy.
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• Regularly audit all disclosure materials to ensure
that all information is up-to-date and current.
– Have a “ready response” team so that updates to items on the School’s
website can be made in a timely fashion.
• Review training materials for admissions
employees to make sure that admissions phone
scripts and interview scripts are compliant.
• Evaluate all fact sheets, advertising and marketing
collateral, and other materials that are provided to
a prospective student during a visit to the school.
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• Make sure that all new employees to admissions
department receive sufficient training to understand
what a substantial misrepresentation is, as well as
the potential consequences.
• Periodically re-train existing employees to
emphasize the need for compliance.
– Conduct mock admissions interviews to test an
employee job knowledge and knowledge of the rule.
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• Consider monitoring admissions telephone calls to
assess compliance.
• Consider using “secret shoppers” to assess
compliance during interviews.
• Draft templates for written communications
between admissions staff and prospective
• Require that written communications between
admissions staff and prospective students be
“cleared” by management prior to sending.
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• Obtain photo release from each student from
whom you intend to use in visual advertising and
obtain a statement of approval from all students
who you ask to provide a testimonial for marketing
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We would be happy to take any questions which you
were unable to raise during the presentation.
If you have additional questions or wish to follow-up
with us later, please contact us:
Stephen T. Chema
[email protected]
703-934-9834 (direct)
Steven M. Gombos
[email protected]
703-934-9826 (direct)
Ritzert & Leyton, PC

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