Concerns incentive compensation and contracts between online program management companies and institutions of higher education and certain proprietary institutions.

S3912

SENATE, No. 3912

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED MARCH 12, 2026

Sponsored by:

Senator� ANGELA V. MCKNIGHT

District 31 (Hudson)

SYNOPSIS

���� Concerns incentive compensation and contracts between
online program management companies and institutions of higher education and
certain proprietary institutions.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act

concerning incentive compensation and online
program management companies in higher education and supplementing Title 18A of
the New Jersey Statutes.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.� As used in this act:

���� �Confidential information� means information contained
in a report or contract submitted to the Office of the Secretary of Higher
Education pursuant to this act that has been identified by the general counsel
or chief financial officer preparing the report or contract as confidential or
proprietary information.

���� �Incentive compensation� means
a commission, bonus, or other incentive provided to an online program
management company for the direct or indirect securing of enrollment or
financial aid. Incentive compensation shall include commissions, bonuses, or
other monetary or non-monetary incentives provided to any person or entity
engaged in marketing, student recruiting, admissions, or determining financial
aid awards. Incentive compensation shall include tuition sharing.

���� �Institution� means an
institution of higher education or a proprietary institution licensed to offer
academic degrees.

���� �Online program management
company� means a third-party private non-profit or for-profit entity that
enters into a contract or agreement with an institution to provide one or more
of the following services on behalf of the institution in exchange for financial
compensation: advertising and marketing services; recruiting, admissions, and
financial services; instruction services; student support services; technology
resources and support services; and curriculum development services.

���� �Tuition sharing� means
compensation or payment to an online program management company based on a
percentage of revenue or a fee collected from managed programs.

���� 2.��� An institution shall be
prohibited from providing incentive compensation, including tuition sharing, to
an online program management company, or any representative or employee
thereof, except for the purposes of recruiting students residing in foreign countries.

���� 3.��� a.� Each contract and
agreement between an institution and an online program management company
entered into, renewed, amended, or substantially modified after the effective
date of this act shall be submitted to the Secretary of Higher Education within
20 days of execution. A copy of any contracts or agreements between an
institution and an online program management company in effect on the effective
date of this act shall be submitted to the secretary within 30 days of the
effective date of this act and shall include the expiration date of the
contract.

���� b.� The governing board of an
institution of higher education shall review and approve or disapprove of any
contracts or agreements between the institution and an online program
management company.

���� c.� The governing board shall
not approve a contract which contains a provision which:

���� (1) allows incentive
compensation as payment for marketing or recruitment services, including when
bundled with other services rendered by the online program management company;

���� (2) includes or permits
tuition sharing;

���� (3) allows an online program
management company to be involved in institutional governance, to share or
fully delegate decision making authority over the design or development of
course curriculums or course instruction, to set admission standards, to determine
enrollment targets, or to share or fully delegate decision-making authority
over the implementation or prioritization of existing or new online programs;

���� (4) permits an online program
management company to hire or provide instructors for any online program,
including replacing the faculty or staff of an institution of higher education
with employees of an online program management company;

���� (5) authorizes an online
program management company to utilize any copyrighted or trademarked
information of the institution, including institutional letterhead, web
addresses, and logos, except in materials that clearly disclose that the online
program management company is a third-party entity that is separate from the
institution and the relationship between the online program management company
and the institution;

���� (6) authorizes or provides an
online program management company or its staff with email addresses that
utilize the name of the institution to appear as though the online program
management company or its staff are employees of the institution; or

���� (7) interferes with, modifies,
or relinquishes any intellectual property rights or patentable discoveries or
inventions of employees of the institution.

���� d.� The minutes of a meeting
at which the governing board approves or disapproves a contract or agreement
between the institution and an online program management company shall include
information concerning the governing board�s approval or disapproval and review
of the contract or agreement.

���� e.� Existing contracts or
agreements between an institution and an online program management company
shall comply with the provisions of this section before the start of the fall
2027 semester, or upon the expiration date of the current contract or agreement,
whichever occurs later.

���� 4.��� a.� An online program
management company that enters into a contract or agreement with an institution
shall submit an annual report to the governing board and chief financial
officer of the institution detailing all expenditures made on behalf of the institution
during the prior academic year. The governing board shall share the annual
report with the majority representatives of all recognized bargaining units and
any governing bodies for faculty or staff. The annual report shall specify the
amounts expended by the online program management company in each of the
following categories of expenditures:

���� (1) advertising, marketing,
and recruitment services;

���� (2) admissions and financial
services;

���� (3) instruction services;

���� (4) student support services,
which shall include activities that occur outside of a student�s formal
instructional program that are focused on advancing student development
including, but not limited to, emotional and physical well-being and
intellectual, cultural, and social development. Student support services shall
include tutoring or extracurricular academic support, student services
administration, social and cultural development, counseling, and career
guidance, but shall not include marketing or advertising services;

���� (5) technology resources and
support services, including the development, management, and maintenance of
information systems including, but not limited to, online learning platforms,
networks, and servers; and

���� (6) curriculum development
materials.

���� b.� The annual report shall
include any additional information required by the Secretary of Higher
Education pursuant to regulations promulgated pursuant to section 8 of this
act.

���� c.� An institution that enters
into a contract or agreement with an online program management company shall
submit an annual report to the secretary that includes for each online program
which the online program management company provides services:

���� (1) the information provided
to the institution by the online program management company pursuant to
subsections a. and b. of this section;

���� (2) the amount of total
payments made by the institution to the online program management company
during each term of the prior academic year;

���� (3) the number of students
receiving State financial assistance during the prior academic year, including
a student loan distributed under the New Jersey College Loans to Assist State
Students (NJCLASS) Loan Program established pursuant to N.J.S.18A:71C-21;

���� (4) the amount of State
operating aid received by the institution, on a per-student basis, during the
prior academic year, and the per-student amount provided to the online program
management company; and

���� (5) a demographic profile of
students, including age, gender, race and ethnicity, education level,
withdrawal and completion rates;

���� (6) a demographic profile of
student loan borrowers;

���� (7) the number of students who
received a Pell Grant or a federal student loan through Title IV of the federal
�Higher Education Act of 1965,� (20 U.S.C. s.1001 et seq.); and

���� (8) information on each
contract with an online program management company, including the services
provided under each contract.

���� d.� The secretary shall
publish each annual report received pursuant to this section on the Internet
website of the Office of the Secretary of Higher Education.

���� 5.��� a.� An institution that enters
into a contract or agreement with an online program management company to
provide marketing or recruitment services for its online programs shall require
that:

���� (1)�� the online program
management company self-identifies as a third party entity that is separate
from the institution at the beginning of any communication with a prospective
student; and

���� (2)�� any digital or print
advertising provided by the online program management company or the
institution for an online program of the institution includes a clear
disclosure of the relationship between the online program management company
and the institution.

���� b.� An institution that enters
into a contract or agreement with an online program management company shall
make publicly available on its Internet website the following information on
the online programs that are supported by the online program management company:

���� (1)�� name of the online
program management company contracted by the institution;

���� (2)�� admission requirements;

���� (3)�� online program�s tuition
costs compared to on-campus program tuition costs;

���� (4)�� financial aid available
for the online program;

���� (5)�� average financial aid
amount provided to students in the online program; and

���� (6)�� percentage of students
in the online program who receive financial aid.

����� 6.� a.� Any information submitted to the secretary
pursuant to this act may be disclosed in accordance with P.L.1963, c.73
(C.47:1A-1 et seq.), commonly known as the open public records act, except that
confidential information shall not be disclosed by the secretary to any person
other than employees and representatives of the Office of the Secretary of
Higher Education.

����� b.�� An institution shall separately identify any
confidential information submitted to the office pursuant to this act.� Any
information that is not identified as confidential information shall be
considered public information and subject to disclosure.

����� 7.�� An institution which violates the provisions of
this act or regulations promulgated pursuant to section 8 of this act shall be
subject to a civil penalty in the amount of $10,000 per violation, or the
maximum amount of incentive compensation due to the online program management
company under the institution�s contract or agreement with the online program
management company, whichever is greater.

���� 8.��� The Secretary of Higher
Education shall adopt rules and regulations pursuant to the
"Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.),
necessary to effectuate the provisions of this act.

���� 9.��� This act shall take
effect immediately.

STATEMENT

���� This bill establishes
requirements for contracts between online program managers and institutions of
higher education and proprietary institutions licensed to offer academic
degrees.

���� Under the bill, an institution
is prohibited from providing incentive compensation, including tuition sharing,
to an online program management company, or any representative or employee
thereof, except for the purposes of recruiting students residing in foreign
countries.

���� The bill requires a contract
or agreement between an institution and an online program management company,
and any amendments to, substantive changes in, or renewals of the contract, to
be submitted to the Secretary of Higher Education within 20 days of execution. A
copy of any contracts or agreements between an institution and an online
program management company in effect on the effective date of the bill are to
be submitted to the secretary within 30 days of the effective date of the bill
and are to include the expiration date of the contract. The bill requires the
governing board of an institution to review and approve or disapprove of any
contracts or agreements between the institution and an online program
management company. The governing board is not to approve a contract or
agreement that contains a provision that: (1) allows incentive compensation as
payment for marketing or recruitment services, including when bundled with
other services rendered by the online program management company; (2) includes
or permits tuition sharing; (3) allows an online program management company to
be involved in institutional governance, to share or fully delegate decision
making power over the design or development of course curriculums or course
instruction, to set admission standards, to determine enrollment targets, or to
share or fully delegate decision-making power over the implementation or
prioritization of existing or new online programs; (4) permits an online
program management company to hire or provide instructors for any online
program including replacing the faculty or staff of an institution of higher
education with employees of an online program management company; (5)
authorizes an online program management company to utilize any copyrighted or
trademarked information of the institution, including institutional letterhead,
web addresses, and logos, except in materials that clearly disclose that the
online program management company is a third-party entity that is separate from
the institution and the relationship between the online program management
company and the institution; (6) authorizes or provides an online program
management company or its staff with email addresses that utilize the name of
the institution to appear as though the online program management company or
its staff are employees of the institution; or (7) interferes with, modifies,
or relinquishes any or all intellectual property rights or patentable
discoveries or inventions of faculty members of the institution.

���� The minutes of a meeting at
which the governing board approves or disapproves a contract or agreement
between the institution and an online program management company are required
to include information concerning the governing board�s approval or disapproval
and review of the contract or agreement.

���� The bill requires each online
program management company that enters into a contract or agreement with an
institution to submit an annual report to the governing board and chief
financial officer of the institution. The annual report is to be shared with
the appropriate faculty and staff unions and any governing bodies for faculty
or staff. The report is to include the amounts expended by the online program
manager on each of the categories of expenditures enumerated in the bill and
any other information required by the secretary.

���� The bill also requires each
institution to submit an annual report to the secretary that is to include: (1)
the information provided in the annual report submitted by the online program
manager; (2) the amount of total payments made by the institution to the online
program management company during each semester of the prior academic year; (3)
the number of students receiving State financial assistance during the prior
academic year that were enrolled in each academic program for which the online
program management company provided services; (4) the amount of State operating
aid received by the institution, on a per-student basis, during the prior
academic year, and the per-student amount provided to the online program
management company; (5) certain demographic information; (6) a demographic
profile of student loan borrowers; (7)

the number of students who received
federal financial assistance; and (8) information on each contract with an
online program management company, including the services provided under each
contract. The secretary is required to publish each annual report on the
Internet website of the Office of the Secretary of Higher Education.

���� Additionally, the bill
requires an institution that enters into a contract or agreement with an online
program management company to provide marketing or recruitment services for its
academic degree programs is to require the online program management company to
self-identify as a third party entity that is separate from the institution at
the beginning of any communication with a prospective student. The institution
is to also require that any digital or print advertising provided by the online
program management company or the institution for an academic program of the
institution include a clear disclosure of the relationship between the online
program management company and the institution.

���� The bill further requires an
institution that enters into a contract or agreement with an online program
manager to make information publicly available on its website for online
programs that are supported by the online program manager.

���� The bill provides that any
information submitted to the secretary pursuant to provisions of the bill may
be disclosed in accordance with the State�s open public records act. An
institution is required to separately identify any confidential information submitted
to the office pursuant to the bill, and any information that is not identified
as confidential information is to be considered public information and subject
to disclosure.

���� Finally, the bill stipulates
that an institution which violates the provisions of the bill is to be subject
to a civil penalty in the amount of $10,000 per violation, or the maximum
amount of
incentive compensation
due to the online program management company under the institution�s contract
or agreement with the online program management company, whichever is greater.
�