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The University of Maryland Global Campus’s agreement with online program provider Coursera to pay “service fees” based on the number of students who enroll in cybersecurity degree programs violates federal law, according to a new lawsuit, though the practice is allowed under Education Department guidance.
Student Defense, a legal advocacy group, argued in the complaint filed in D.C. Superior Court that the university violated the D.C. Consumer Protection Procedures Act because the institution didn’t disclose the incentive-based compensation to students, and that the payments amount to a deceptive trade practice, which the D.C. law prohibits.
At the crux of the lawsuit is 2011 Education Department guidance that exempts colleges and outside companies from the federal ban on incentive compensation, which refers to paying commission or bonuses tied to securing enrollment or financial aid. Third parties are exempt from that ban if they provide a bundled set of services to a college, according to the guidance. That way, a company could receive financial benefits for enrolling students as long as the university also pays for other services, such as technology support, in addition to student recruitment. According to the lawsuit, Coursera provides marketing services for UMGC and develops content for degree programs—exempting it from the ban.
Student Defense is suing “on behalf of consumers, without representing specific individuals who have been harmed,” according to a news release about the lawsuit.
Consumer protection advocates and other groups have called for years for the department to rescind the 2011 guidance. Last year, the Education Department signaled its openness to reconsidering the exemption, but those talks didn’t move forward. But as federal judges show greater skepticism of agencies’ interpretation of federal laws, Student Defense lawyers see an opening to overturn the guidance that they argue is unlawful, under a plain text reading of the Higher Education Act of 1965.
They aren’t seeking monetary damages but do want a D.C. judge to say incentive compensation violates the Consumer Protection Procedures Act and block UMGC from paying service fees to Coursera.
A UMGC spokesperson declined to comment on the active litigation.
