My name is Barmak Nassirian and I serve as Vice President for Higher Education Policy with Veterans Education Success, a nonprofit research, policy, and student veteran advocacy organization. We work on a non-partisan basis to advance higher education success for veterans, service members, and military families, and to protect the integrity and promise of the GI Bill® and other federal postsecondary education programs.
I appreciate the opportunity to offer comments on the 2011 “bundled services” guidance, its deleterious consequences for students and taxpayers, and its corrosive and corrupting effect on higher education institutions.
The 1992 reauthorization of the Higher Education Act imposed an absolute ban on the payment of “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 2011, however, the Department unilaterally modified the absolute statutory ban on the payment of commissions and allowed institutions to share a percentage of their tuition revenues — essentially, a commission for every “sale” — with “unaffiliated” and “independent” third parties that bundle additional services with recruitment functions. That tortured rationalization of revenue-sharing practices, however, does not make them any less violative of the unambiguous statutory ban. At the time, the Department’s Inspector General correctly recorded non-concurrence with the decision in characteristically sober fashion: “We do not believe that the existing statutory ban on incentive compensation allows any incentive payments to entities involved in recruiting based on their success in enrolling students.”
The Department was moved to disregard the underlying legislation as a result of an intensive and orchestrated campaign by sales and marketing operations masquerading as “IT firms” and traditional institutions seeking to quickly expand their online presence with minimal upfront investments. They sold the Department on the promise that disregarding the ban would enable legitimate, mission-driven educational institutions to better compete with the shoddy for-profit mega-universities that then dominated distance education.
Sadly, but not unpredictably, the guidance has produced the exact opposite of its intended effects. Instead of creating an ecosystem of accessible high-quality programs, the guidance has imported the worst features of predatory for-profit institutions into traditional higher education and normalized them through ubiquity. These include saturation marketing, high-pressure sales tactics, lax or nonexistent admissions standards, subpar curricular and instructional offerings, and exorbitant pricing financed with debt. What’s more, Online Program Management companies are increasingly involved in the design and implementation of academic programs in ways that violate even the modest restrictions of the guidance itself.
It is high time for the Department to recognize and remedy its mistake and comply with the statutory ban by rescinding the bundled services guidance altogether. The proliferation of substandard high-cost distance education programs facilitated by the fundamentally corrupt commissioned sales technique has hurt not only students and taxpayers but also higher education institutions, the legitimacy of whose programs has been compromised by OPMs. Beyond the withdrawal of the guidance, the treatment of OPMs as regulated third-party servicers is an absolute necessity for improving program integrity and protecting students.