Obama Ban On For-Profit College Recruiting Bonuses Upheld

Wednesday, June 6, 2012

The Obama administration's rule barring for-profit colleges from paying recruiters bonuses tied to the number of students they sign up was upheld by a federal appeals court.

The U.S. Court of Appeals in Washington ruled today that U.S. Education Department regulations on the practice, put into effect in 2011, were properly enacted and are consistent with the aims of the Higher Education Act of 1965. At the same time, the court ordered the trial judge to get further explanation from the department of the effect of the rule change on minority recruitment.

The court also questioned whether the department had justified eliminating bonuses for recruiters that are based on students' successful completion of programs.

The Obama administration proposed the rules as part of a crackdown on for-profit colleges' recruitment and marketing practices. The U.S. Department of Education, Congress, federal prosecutors and state attorneys general are scrutinizing the institutions, which rely on federal financial aid for as much as 90 percent of their revenue and have higher student-loan default rates than traditional colleges. The industry says it caters to lower-income and minority students overlooked by the higher- education establishment.

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