- At 22.1% in 2008-09, the proprietary sector is nearing their two decade high of 24.2% share of federal student loan volume which they reached in 1990, just prior to the Nunn report and the ban on incentive compensation in 1992.
- In the decade where this ban on incentive compensation was weakened through the introduction of twelve "safe harbors" in 2002, the percentage of federal loans going to proprietary schools has grown from 12% in 2000 to 22.1% in 2008-09. I can't prove causality, but it is interesting to note that in the period following the ban from 1993 to 2000, the proprietary sector's share of the federal loan market, despite annual gyrations, remained almost unchanged from 11.5% in 1993 to 12.0% in 2000.
The Department of Education has proposed regulations to eliminate the safe harbors and go back to the earlier ban on incentive compensation. Following the GAO report and hearing, University of Phoenix in a press release today indicated that they would be making the following changes to their compensation plans:
"In addition, as previously announced, beginning November 1 of this year the University plans to roll out a new student counselor compensation framework, which has been in development and testing for more than a year...A firm decision to change the way counselors are evaluated and compensated, including a commitment to completely eliminate admission targets as a component of compensation."
- What will the admissions counselors compensation be based upon (and what behaviors will this compensation structure encourage)? As anyone who has managed salespeople knows, they respond to incentives!
- Will competitors be following suit with compensation changes or just waiting until they are forced to when the new regulations take effect?
- How sharply will enrollment growth decline as a result of the new compensation structures (and all the negative publicity swirling in the sector)?