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For-profit colleges rein in paying recruiters based on enrollment numbers

Two for-profit colleges whose recruiting tactics were singled out in a scathing undercover government investigation are pledging to stop using enrollment targets as a factor in paying admissions representatives.

Denver-based Westwood College will begin paying admissions officials a fixed salary Aug. 21, part of a series of reforms adopted shortly after the report's airing last week. Industry giant Apollo Group Inc.'s University of Phoenix already announced plans to do away with using admissions targets in paying recruiters.

Last week at a Senate hearing, the Government Accountability Office detailed how investigators posing as prospective students found deceptive and in some cases possibly illegal actions at 15 for-profit schools.

The report described fraudulent practices encouraged at four schools, including cases of recruiters urging fudged federal aid applications. In other instances, recruiters gave misleading information about programs' cost and potential salaries after graduation.

On Friday, Education Secretary Arne Duncan revealed that his department would use similar investigative tactics as part of beefed-up oversight of for-profit colleges. Duncan described that step and others in a letter to Democratic Sen. Tom Harkin of Iowa, chairman of the Senate Committee on Health, Education, Labor and Pensions.

Westwood College CEO George Burnett said he was "absolutely appalled" by what he termed unauthorized actions by a few employees brought to light in the GAO investigation. The agency says a Westwood representative in Dallas urged its secret shopper to not report $250,000 in savings to qualify for federal aid.

Along with an internal investigation by outside legal counsel, the college says it is putting in place third-party verification programs to ensure students understand admissions and financial aid information, expanding its own "mystery shopping" program, raising its admission requirements and improving its admissions presentation.

Currently, Westwood admissions representatives are paid a base salary and then in twice-yearly reviews can earn more or less based on several factors, said Bill Ojile, Westwood's chief legal counsel. Those factors include how many students they enroll as well as whether those students stay in school and graduate, he said.

All those incentives will disappear Aug. 21, when the college changes to a static salary.

"It certainly takes away any perception by either the student, the representative or any external party that somehow there's something going on in compensation that is leading to the wrong behavior," Burnett said.

The college's parent company, Alta Colleges Inc., agreed to pay $7 million in a Justice Department settlement last year involving allegations that its Texas schools submitted false claims for federal student aid.

On Thursday, two former Westwood students filed lawsuits alleging misleading recruitment tactics — part of an ongoing legal and public relations fight between the college and a Florida law firm trying to bring a class-action lawsuit.

The 476,500-student University of Phoenix, which receives more federal financial aid than any other U.S. college, has promised an overhaul of how it pays recruiters, as well. Among other reforms, the school says it will "completely eliminate admissions targets as a component of compensation" in a new system that will be in place Nov. 1.

In December, Apollo Group Inc. agreed to pay almost $80 million in a settlement with the federal government stemming from a 2003 lawsuit alleging violations in recruiter pay.

Both colleges making the policy changes are taking steps that, in all likelihood, will be required within a year.

Since 1992, admissions officers at for-profit colleges have been barred from receiving incentive pay based on securing enrollments. But since then, a dozen loopholes have been put in place allowing the practice, with limits. The Education Department has proposed regulations that would eliminate such "safe harbors" starting in July 2011.

Harris Miller, head of the Career College Association, a lobbying group, said the government's proposal would also do away with incentives that benefit all — including those that reward recruiters based on students graduating.

Colleges that aren't moving away from incentive pay will be soon, requiring them to focus more on retention sand other ways to keep up enrollment levels, said Kevin Kinser, an associate professor at the State University of New York at Albany who studies the sector.

"Whether it's going to curb the abuses or not, it's an important step to take," Kinser said.

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