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U.S. needs to get tough on recruiter pay: report

By Diane Bartz

WASHINGTON (Reuters) - The Department of Education needs to get tougher on enforcing a ban on incentives for college and vocational school recruiters to discourage deceptive practices, the Government Accountability Office said in a report on Thursday.

Recruiters at some schools, in particular for-profit schools that train students for blue- and pink collar jobs such as air conditioner installer and medical assistant -- have been accused of overly aggressive and deceptive practices.

The Education Department banned most payments to recruiters 1992 and is seeking to close remaining loopholes when it issues a package of final rules around November 1.

Even as the battle rages over whether to tighten the rules, the GAO urged the Education Department to strengthen auditors' procedures, change procedures to focus on schools most likely to violate the ban and update its guidance on penalties for violating the ban.

While the report made little specific mention of for-profit schools, the issue of recruiter incentives is a big one for the schools.

Critics have said many of the schools fail to teach real skills and leave students heavily in debt with student loans. The S&P education services index closed down 1.74 percent on Thursday at $96.09.

The Education Department proposed on June 15 tightening rules against incentives for recruiters.

Currently, safe harbors allow up to two salary or hourly wage adjustments in any 12-month period and allow profit-sharing if it is available to all full-time employees.

Other rules would require schools to give prospective students their graduation and job placement rates.

In July, the department proposed a rule that said for-profit schools would have to prove their former students were either paying off loans or could do so.

Under the proposed rules, the federal government would no longer lend to programs if more than 65 percent of former students failed to pay the principal on federal loans and if their graduates' debt was more than 30 percent of discretionary income and 12 percent of total income, the department said.

Education Secretary Arne Duncan forecast that five percent of programs would lose federal funds.

(Reporting by Diane Bartz; editing by Andre Grenon)