For-profit colleges that pay recruiters on the basis of the number of students they sign up may lose access to U.S. government student aid, which provided the colleges with $26.5 billion last year and can account for as much as 90 percent of company revenue.
The Department of Education, seeking to strengthen oversight of the for-profit college sector, is considering boosting fines and disqualifying colleges from participating in federal-aid programs when they give bonuses to admissions officers for enrolling more students, said James Kvaal, deputy undersecretary of Education.
The Education Department plans, in July, to make incentive compensation for recruiters illegal, removing 12 types of exemptions that were put into place in 2002 under President George W. Bush. At that time, the department’s enforcement power was reduced to levying fines, Kvaal said.
For-profit colleges have come under growing scrutiny as Senate and House committees examine how for-profit colleges mislead applicants, target veterans and register student default rates that are at least double those of traditional universities. Republicans are raising objections to tougher regulations as they prepare to take control of the House of Representatives in January.