Issue Primers

Under the Higher Education Act of 1965, institutions of higher education participating in the federal student aid programs must agree they will not provide incentive payments to recruiters who work for or with the school in exchange for enrolling students or obtaining financial aid.

The requirements, known broadly as “incentive compensation” rules, were developed over time in response to reports of aggressive and abusive marketing and recruitment practices, particularly among for-profit postsecondary education providers. An investigation led by Senator Sam Nunn produced a landmark 1990 report that detailed examples of such practices, including competitions with cash or other rewards for contacting and, ultimately, enrolling the highest number of students or submitting the largest number of loan applications. The report recommended that institutions be prohibited from making payments of any commission, bonus, or salary incentive to recruiters.