Higher Education: Information on Incentive Compensation Violations Substantiated by the U.S. Department of Education

In 1992, Congress banned schools participating in federal student aid programs from paying commissions, bonuses, or other incentive payments to individuals based on their success in enrolling students or securing financial aid for them. Congress instituted this incentive compensation ban to eliminate abusive recruiting practices in which schools enrolled unqualified students who then received federal student aid funds. In 2002, the U.S. Department of Education (Education) issued regulations--commonly referred to as "safe harbors"--that allowed for 12 activities or payment arrangements that schools could use without violating the ban against incentive compensation. As of January 2010, Education was reviewing these safe harbor regulations as part of a negotiated rule making process to maintain or improve federal student aid programs. The Higher Education Opportunity Act (HEOA) mandated that GAO conduct a study on Education's enforcement of the incentive compensation ban in light of the safe harbors and report on the number of violations substantiated by the Secretary of Education since 1998, the nature of these violations, and the names of the institutions involved. As agreed with Congressional offices, this report provides information on violations of the incentive compensation ban substantiated by the Secretary since 1998.