A For-profit College Explains Compensation Plans

In an update to the story of the Justice Department’s lawsuit against for-profit education company Education Management Corp., the company has responded.

The lawsuit alleges that Education Management Corp. engaged in an $11 billion fraud because the company “falsely certified compliance with provisions of federal law that prohibit a university from paying incentive-based compensation to its admissions recruiters that is tied to the number of students they recruit. “

The company, however, says that its actions were at the time compliant. According to a press release the company issued Monday:

Federal regulations issued in 2002 permitted companies to consider enrollments in admission officer compensation, so long as enrollments were not the sole factor considered. To ensure compliance with this regulation, EDMC worked closely with outside experts in both human resources and education law to develop a plan that required consideration of five quality factors along with enrollment numbers to determine salaries.

The company is correct that in the last decade, thanks to weakened regulations of the for-profit education industry during the Bush administration, for-profit colleges were allowed to pay employees extra for the number of students they recruited.

It seems that this comes down to what period the lawsuit addresses and how much of the Education Management Corp. compensation had to do with enrollment recruiting.

In July the Department of Education changed the regulations to prohibit colleges from awarding money to employees based on the number of students they enrolled.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer