Draft Proposal on Marketing, Recruiting and Advertising Spending 

September 30, 2013 

Reporting and Disclosure. Require any school at which a majority of its programs are subject 

to the HEA’s gainful employment requirement to report to the Department consistent data on: the 

share of the school’s revenue spent on marketing, advertising and recruiting; and average per 

student expenditures on marketing, recruiting and advertising. Many colleges are already 

reporting these data to the Department, but they are using inconsistent definitions so the data are 

not comparable. 

This proposal should be applied only to colleges that spend more than 10% of their revenues on 

marketing, advertising and recruiting. The rationale for this trigger is three-fold. By necessity, 

schools that spend a higher share of their revenues on marketing, recruiting and advertising have 

less to spend on instruction, and are therefore at greater risk of not preparing students for gainful 

employment. They also may be more likely to misrepresent their programs. In addition, schools 

that spend more than 10% of their revenue on marketing, advertising and recruiting may in fact 

be spending federal student aid funds on these activities since colleges may receive up to 90% of 

their revenues from Title IV funding. This alternative would reduce the reporting burden for 

schools that are spending less than 10% of their revenues on marketing, recruiting and 

advertising. 

Definitions: “Advertising, marketing, and recruiting activities” would be defined as in the 

Harkin-Hagan bill S. 528. 

Accuracy of data: The President, CEO and CFO of the institution (and its parent company if 

applicable) would certify the accuracy of the submission, and attest that the submitted 

information is true and complete, and that there is no substantial contrary internal information or 

relevant and material planning documents on any of the requested data points that are being 

withheld. If the 10% trigger were used, schools that do not spend more than 10% of their revenue 

on these activities, would only have to certify that they do not spend more than 10% on these 

activities (i.e., they would not have to determine or report the precise percentage—just certify 

that it is not more than 10%). 

Justification: 

 The Department Inspector General’s July 2013 audit report found that proprietary schools 

do not report to the Department consistent or meaningful information on instruction and 

marketing expenses, and urged the Department to collect this information to help target 

and improve its oversight.1

 The report states, “For example, a school with low 

instructional expenses could be at higher risk of misrepresenting the nature of its 

programs or facilities. Similarly, a school with high marketing expenses could pose a 

higher risk of paying incentives to recruiters in violation of the ban on incentive 

compensation.” A school with higher marketing expenses may also be at more risk of 

misrepresenting its programs, including its job placement rates. 

 

1

 Education Department, Office of the Inspector General, “Transparency of Proprietary Schools’ Financial Statement 

Data for Federal Student Aid Programmatic Decisionmaking,” July 23, 2013. 

http://www2.ed.gov/about/offices/list/oig/auditreports/fy2013/a09l0001.pdf. 
2 

 Consistent and comparable information on marketing and instruction expenses could also 

be of interest to students in deciding where to enroll. The Senate HELP Committee 

report found that many of the largest for-profit colleges, almost all of whose programs are 

subject to GE requirement, are spending taxpayer dollars on advertising, recruiting and 

marketing, and are spending much more on these activities than on instruction. For 

example, the Senate HELP Committee investigation found that the 15 publicly traded forprofit college companies spent on average 23% of their revenues on marketing, recruiting 

and advertising in 2009. By comparison, McDonald’s typically spends 3% of revenues 

on marketing and advertising, and Target spends 2% on these activities. 

 The requirement would apply only to schools at which a majority of its programs are 

subject to the GE requirement in order to reduce the burden on schools were a majority of 

their program are not subject to the requirement.