Payments spark off row over sins of commission

November 16, 2007

Admissions ethics are in the spotlight after revelations that US universities recruiting abroad pay incentives to agents who sign students, a practice banned at home. Jon Marcus reports. When the University of Maryland's distance-learning offshoot, University College, launched a management studies course for international students in Taiwan, the official announcement was enthusiastic about the potential of such programmes worldwide.

US universities, after all, have been falling over each other in a race to extend their reach overseas through what has become known as offshoring, the profitable business of allowing foreign nationals to earn US degrees in their home countries.

But the picture was quickly muddied by the disclosure that the University of Maryland University College (UMUC) was paying a commission of up to 25 per cent to a Taiwanese company to recruit students for the programme, a practice that US are banned from doing when recruiting home students.

Although the law does not apply to international students, several US higher education professional associations deplore the idea of paying commissions in any circumstances, anywhere. They also concede that the practice is widespread and was previously little known.

"You'd be hard pressed to find a US institution that does not engage in this process overseas," said David Hawkins, public policy director for the 10,000-member National Association for College Admissions Counselling, which was set up in the 1930s in response to corruption in the university admissions process.

Paying commissions to recruit foreign students violates the association's mandatory guidelines. But despite the fact that the practice is apparently pervasive, no formal complaints have been filed, Mr Hawkins said.

Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers, said: "I'm increasingly worried about the likelihood that too many US institutions will find the rest of the world a convenient place to cut corners and hand out degrees they could never stand behind at home, simply because it's outside American jurisdiction and anything goes." His association also opposes commissions for recruiting.

"Legally speaking, the arrangement is technically in conformity with US law," Mr Nassirian said. But his association believes that practices that are illegal in the US should be avoided by US universities wherever they operate.

"Admissions is counselling work, and this requires that when you dispense advice you have a certain level of obligation to a student or family to dispense this in their best interests. The moment you put someone in an admissions position on a commission-incentive basis, you create conflicting incentives."

UMUC paid commissions of up to 25 per cent to ST International, a Taiwanese company, to find students for its doctor of management programme in Taiwan. But after being thrust into the spotlight by news stories, the university is reviewing the arrangement, including a provision under which STI was found to be demanding students pay their entire three-year tuition in advance.

"Outside the US there are different standards. If you're going into these markets, there are different realities to deal with," said Chip Cassano, a spokesman for Maryland. "There are no indications of any wrongdoing or improprieties on our part, or on the part of the recruiter."

As for whether Americans and non-Americans should be subject to the same recruiting rules, he said: "That's a topic that's worth examining. It's certainly one of the things we're looking at."

The stakes are high. There are 582,984 international students at US universities, many of whom pay the full tuition, which is often discounted for home entrants. Overseas students pump some $13.5 billion (£6.4 billion) into the US economy, and higher education is the country's fifth- largest service-sector export.

Universities in competitor countries openly pay commissions to recruiters. Australian institutions, for example, paid A$64 million (£29 million) in commissions in 2005, the last year for which figures are available. That is a payment approaching 4 per cent of all the revenue the universities received from foreign students, although in some cases individual commissions were as high as 25 per cent.

Complicating the matter is the rapid growth in the number of overseas campuses being set up by US universities, particularly in wealthy countries in the Middle East and Asia. While the profit potential for universities is high, the novelty of offshoring means there is still little regulation of it.

In addition to handling recruitment, STI provides classrooms in Taipei, where matriculated students attend some courses taught by Maryland faculty (the students also fly to the US for a one-week residency as part of the course), an arrangement that allows the university to operate in Taiwan without having to lease or maintain any space there.

US higher education experts said there were companies operating in the way same as STI in other countries, such as Sri Lanka, Hong Kong, the United Arab Emirates and Ecuador.

STI itself is also a partner with other US universities, though most of those schools do not go out of their way to advertise this. At least one, the University of North Alabama, runs a masters in business administration jointly with STI in Taipei but says it does not pay commissions for students recruited.

Other universities use foreign agents to recruit international students with commissions that range from 10 per cent to 15 per cent of the cost of first-year tuition.

At least one recruiter in Hong Kong was dropped by US schools when they learnt that he was promising to place students in high-level courses even when they had inadequate English-language skills.

"Ultimately, the root of the prohibition against commissions is that when you reduce the basis for compensation for admissions officers to a per head fee, the incentive to act in the student's interest is in effect eliminated," Mr Hawkins said.

Paying commissions to recruiters for signing up American students has been against the law in the US ever since for-profit trade schools were exposed for enrolling homeless people, applying for government tuition loans on their behalf and providing them with little or no education.

But the ban does not apply to foreign students because they are ineligible for US education loans - and also thanks to heavy lobbying by the for- profit education sector.

"There had been a regrettable and sordid history of for-profit institutions in the US, basically deploying door-to-door sales techniques to recruit students," Mr Nassirian said. (His admissions counsellors' association tried but failed to convince the Bush Administration to close the loopholes in the law.) "We need principles that guide us so we don't go down the slippery slope of looking at this in purely monetary terms," Mr Nassirian said.

UMUC is one of the world's largest virtual universities, with more than 143,000 students. It launched its three-year management studies programme in Taiwan last year. Students on the programme, which is seen as a model for similar programmes worldwide, work online, in classrooms provided by STI in Taipei, and spend a week studying in the US.

Although Maryland has faced the most scrutiny because of the disclosures, other universities also have partnerships with STI and with similar companies in other countries.

The Maryland controversy is likely to focus new attention on the issue.

"We're at a point now with globalisation where international post- secondary education is only going to increase," Mr Hawkins said. "We've had a number of questions come up about this over the past few years. I don't see it as a conversation we can avoid."

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