UCI ends fee-based transfer program

The continuing education branch of UC Irvine is ending an agreement in which it receives $500 for every student it refers to an online for-profit university, citing the appearance of an ethical breach.

Several officials with higher education associations have criticized the arrangement, saying it blurs the line between giving advice and marketing.

For the last five years, UCI Extension has had an agreement with Minneapolis-based Capella University in which the online school accepts UCI’s continuing education students and their UCI credits into several graduate programs in exchange for the referral fee.

Capella, which has enrolled 36 UCI students, has paid the university $12,000, according to UCI, which did not tell students it made money when they enrolled at Capella.

Gary Matkin, UCI’s dean of continuing education, said the money was used to market students’ eligibility to transfer to Capella in the extension program’s quarterly catalog, on its website and through letters sent to students. Matkin, who set up the arrangement in 2002, said, “Everything we did was perfectly legal, straightforward and in the best interests of our students.

“People are misconstruing this as somehow being, if not illegal, unethical, so we’re just going to stop.”

Critics say incentive-based agreements such as that between UCI and Capella are unethical because they turn college counselors into salespeople.

“This is basically a finder’s fee or a commission paid by one institution to another for qualified leads that pan out financially,” said Barmak Nassirian, associate executive director of the American Assn. of Collegiate Registrars and Admissions Officers in Washington, D.C. “It’s a problem when an institution ends up having a financial stake in where a student enrolls.”

In a written statement, Capella spokesman Michael Walsh characterized the referral fees as “tuition-sharing payments” to offset UCI’s costs for marketing his school’s programs.

UCI set up the deal to ensure that students were aware that they could use their continuing education credits toward a graduate degree at Capella, Matkin said.

Most extension students are working adults who already have college degrees, although nearly anyone can enroll if they meet class requirements.

Capella’s payments to UCI, first reported in the Chronicle of Higher Education, came to light after Jeffry La Marca, 49, of Rancho Santa Margarita, a former student at UCI Extension, filed a public records request for letters and e-mails between UCI and Capella in his unrelated lawsuit against the for-profit school.

After The Times asked questions about the arrangement, Matkin announced the school would end the arrangement by Oct. 31. Matkin said he planned to place $12,000 from the extension program’s budget into a scholarship fund for needy students.

Three of the eight University of California campuses that have extension programs -- UCI, UC Santa Cruz and UC Berkeley -- have credit-transfer agreements with Capella, said Chris Harrington, a spokesman for the UC president’s office. Santa Cruz does receive payments. Berkeley, which set up an arrangement similar to UCI’s in 2004, has not received any per-student fees because no one taking a class eligible for referral has transferred.

Berkeley also is ending the program because of the public perception of ethical problems, said Ann Guy, spokeswoman for the university’s extension program.

Capella is the only for-profit university that has paid transfer agreements with UC schools, Harrington said.

Congress banned incentive-based recruiting by colleges that receive federal student aid in 1992. In 2001 and 2002, the Department of Education found several universities had violated the ban.

In 2002, the Bush administration published regulations that created exemptions that allowed such payments to be made in certain situations. The Department of Education, which has authority over those exemptions, has not reviewed UCI’s agreement with Capella and would not comment on its legality to outside parties, said press secretary Samara Yudof.

The concern over UCI’s agreement with Capella comes after congressional and state investigations found that some loan companies were providing payments, gifts and perks to universities and officials that steered student loan business their way.

Some critics, such as Nassirian, said UCI’s relationship with Capella is similar because it involves deals carried out without students’ knowledge and both agreements involved schools “treating the student as an asset to be traded upon.”

Capella has “numerous” credit-transfer programs, mostly with community colleges, Walsh said, but he declined to disclose how many involve per-student payments.

UCI Extension has credit-transfer agreements with three other institutions: Keck Graduate Institute of Applied Life Sciences in Claremont, and two online programs offered by the University of Wisconsin at Platteville and the Florida Institute of Technology. Capella is the only school that pays UCI.

“Because it is for-profit, I felt that it was logical for us to seek some sort of compensation for the marketing we are doing for them,” Matkin said, “so we asked them to give us money for the number of students that matriculated to them.”

David Hawkins, director of public policy and research for the National Assn. for College Admission Counseling, in Alexandria, Va., said such arrangements appeared to be in conflict with the association’s ethical code, which bars member schools from accepting payments for placing or recruiting students. UCI is not a member, but UC Berkeley is.

“Any time you reduce the basis of recruitment to cash kickbacks or commission sales, the ability and willingness of recruiters to act in the interest of students goes downhill quickly,” he said.

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tony.barboza@latimes.com