ED Solicits Feedback on Incentive Compensation and Updates Third-Party Servicer Guidance

By Hugh T. Ferguson, NASFAA Managing Editor

The Department of Education (ED) on Wednesday announced that it will be reviewing the bundled services exception to the incentive compensation ban in current guidance and also issued updated guidance seeking to provide clarity on what entities are considered third-party servicers.

The review will include listening sessions and opportunities for public comment specifically concerning third-party entities that provide student recruiting and retention, software products and services involving Title IV administration activities, and the educational content and instruction, commonly known as Online Program Managers (OPMs).

The Department’s updated guidance clarifies that OPMs are considered third-party servicers and, as such, are subject to institutional reporting rules and annual third-party servicer audits.

ED’s listening sessions will focus on what, if any, changes should be made to the incentive compensation guidance regarding the exception for bundled services offered by OPMs as well as how past guidance has “affected the growth of online enrollment and associated federal student loan debt.”

Under Secretary James Kvaal said ED was concerned about the growth of student loan debt and that the ongoing review would “undertake a careful, fair, and thorough review of the rules around how contractors recruit students for online programs.”

Wednesday’s announcement included two opportunities for the submission of public comments with ED.

The first is on ED’s guidance from 2011, which bans  commissions based on securing enrollment, but includes an exception for third parties if they provide “a bundled set of services,” that can include recruitment.

The virtual listening sessions on this topic will be held on March 8 and 9 from 1-4 p.m. ET and written comments will be accepted through March 16, 2023.

The second opportunity for public comment concerns the updated third-party servicer guidance, which was also issued on Wednesday.

ED’s updated guidance clarifies ED’s position that companies and other organizations that provide recruitment services, software products and services involving Title IV administration activities, or educational content and instruction for colleges fall into the category of a “third-party servicer.”

The guidance gives institutions until May 1, 2023 to report arrangements with third party servicers such as OPMs that were not previously reported to ED by submitting a new “Third-Party Servicer Data Form” to ED or updating their existing form.

“The updated guidance will ensure the Department has full transparency into and more data on the companies that work with colleges in areas that relate to federal financial aid,” ED wrote in Wednesday’s notice. “It also ensures that the Department and auditors will have the ability to review these companies’ compliance with federal rules and regulations.”

Comments on either of these topics can be submitted through and/or to [email protected].

Stay tuned to Today’s News for more coverage of these sessions.


Publication Date: 2/16/2023

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