Student Defense files lawsuit alleging that UMGC’s use of revenue sharing is illegal
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September 18, 2024
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Student Defense files lawsuit alleging that UMGC’s use of revenue sharing is illegal
Student Defense filed a lawsuit in D.C. Superior Court yesterday entitled National Student Legal Defense Network v. University of Maryland Global Campus, which asserts that UMGC has violated the D.C. Consumer Protection Procedures Act (CPPA) due to conduct related to the payment of incentive-based compensation to Coursera, Inc.
The lawsuit first asserts that UMGC has promoted its policy of not paying incentive-based compensation, when in fact it does. UMGC has an arrangement with Coursera, an online program management company, relating to its Bachelor of Science in Cybersecurity Management and Policy and Bachelor of Science in Cybersecurity Technology degrees. Under this arrangement—and consistent with Coursera’s business model—UMGC pays Coursera a fee that is directly tied to the number of successful student enrollments. With each student Coursera recruits and enrolls, UMGC pays a larger sum.
The lawsuit also asserts that UMGC’s compensation arrangement with Coursera violates the Incentive Compensation Ban and, by extension, is an unfair and deceptive trade practice prohibited by the CPPA.
Student Defense brings this lawsuit in consideration of recent developments to the CPPA which allow certain nonprofit organizations groups to bring litigation on behalf of consumers, without representing specific individuals who have been harmed. Student Defense’s lawsuit does not seek to impose monetary damages against UMGC.
Under the Higher Education Act, institutions participating in federal financial aid programs are prohibited from providing “any commission, bonus, or other incentive payment” that is “based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance.” 20 U.S.C. § 1094(a)(20). This prohibition, designed to curb predatory recruiting practices in higher education, is referred to as the “Incentive Compensation Ban.”
For nearly 15 years, many institutions of higher education have skirted the Incentive Compensation Ban and have paid third party commissions based on success recruiting students. To do so, these institutions have largely relied on a 2011 guidance letter issued by the U.S. Department of Education. This guidance—often referred to as the “Bundled Services Exception”— has created a loophole in the law whereby institutions can, with the Department’s apparent blessing, use an incentive-based compensation scheme, if the third party recipient provides recruiting services in addition to other aspects of the institution’s online programs (i.e., a “bundle” of services). Student Defense has long argued that the 2011 guidance is unlawful under a plain text reading of the Higher Education Act.
Proponents of the bundled services guidance have long argued that so-called “revenue share” arrangements have facilitated the growth of—and perhaps are necessary to sustain—online higher education. Yet regardless of one’s views on revenue share arrangements or online education, both the guidance and UMGC’s conduct under it, are contrary to law.
In recent years, courts have been increasingly skeptical of statutory interpretations issued by federal agencies. Regardless of any deference owed to agency statutory interpretations, the Supreme Court has noted that “the place to make new legislation, or address unwanted consequences of old legislation, lies in Congress.” Bostock v. Clayton County, Georgia, 590 U.S. 644, 680-81 (2020).
You can read the full complaint on the Student Defense website.