EDU Compensation Rules as I understand them

Posted By: Admin | Posted In: Trending News |
March 13, 2009

EDU Compensation Rules as I understand them:


Adjustments to employee compensation

A school may make up to two adjustments (upward or downward) to a covered employee’s annual salary or

fixed hourly wage rate within any 12-month period without the adjustment being considered an incentive

payment, provided that no adjustment is based solely on the number of students recruited, admitted, enrolled,

or awarded financial aid. One cost-of-living increase that is paid to all or substantially all of the school’s full-time

employees will not be considered an adjustment under this safe harbor.

This is where some schools tend to walk a fine line…or step over it!


Enrollments in programs not eligible for FSA program assistance

Compensation to admissions based upon their recruitment of students who enroll only in programs that are not

eligible for Title IV funds is not covered by the incentive compensation prohibition.


Contracts with employers

As long as there is no direct contact by the school’s representative with prospective students, and as long as

the employer is paying at least 50% of the training costs, incentive payments to admissions recruiters who arrange for

contracts with employers are not covered by the incentive payment prohibition, provided that the incentive

payments are not based on the number of employees who enroll, or the amount of revenue generated by those



Pre-enrollment activities

Individuals whose responsibilities are limited to pre-enrollment activities that are clerical in nature are outside

the scope of the incentive payment restrictions. Individuals may not receive incentive compensation based on

their success in soliciting students for interviews.


Managerial and supervisory employees

The incentive payment prohibition applies only to individuals who perform activities related to recruitment,

admissions, enrollment, or the financial aid awarding process and their immediate supervisors.


Profit-sharing or bonus payments

Profit-sharing and bonus payments to all or substantially all of a school’s full-time employees are not incentive

payments based on success in securing enrollments or awarding financial aid.


Compensation based upon program completion

Compensation that is based upon students successfully completing their educational programs, or one

academic year of their educational programs, whichever is shorter, does not violate the incentive compensation



Token gifts

The maximum cost of a token, noncash gift that may be provided to an alumnus or student who refers a student

is $100, provided that the gifts are not in the form of cash and no more than one gift is provided annually to an


This is an area schools can & should use more, many have had great success with referral programs using this one-time gift benefit!


Profit distributions

Any owner, whether an employee or not, is entitled to a share of the organization’s profits to the extent they

represent a proportionate share of the profits based upon the employee’s ownership interest.


Internet-based activities

A school is permitted to award incentive compensation for Internet-based recruitment and admission activities

that provide information about the school to prospective students, refer prospective students to the school, or

permit prospective students to apply for admission online.  Thanks god for this since Internet leads represent the majority of leads for most schools.


Payments to third parties for non-recruitment activities

Payments to third parties for other types of services, including tuition-sharing arrangements, marketing, and

advertising are not covered by the incentive compensation prohibition.  This is an area for growth, partnering with schools on a success basis!


Payments to third parties for recruitment activities

The incentive compensation prohibition applies to individuals who work both for the school and to entities

outside the school, and that the rules that apply to schools apply equally to outside entities.