The discussion about using commission-based student recruiting agents has been an arduous and drawn out debate in the United States. With the NACAC acceptance, or let's say toleration, allowing NACAC members to use commission-based agents as long as they are managed appropriately, we have moved into the implemenation phase of agent-university relations.  One question that we hear frequently asked or at least mentioned with lots of grumbling is the "double-dipping" done by agents.  

"Double-dipping" refers to the payment from parents and/or students to the agent for their services PLUS the compensation agents receive from universities.  I admit that I have always been puzzled by this question. In my view, one can object to the compensation via a commission-based arrangement since it implies a financial incentive to direct a student to one or another university.  I get that--the same way any other sales or marketing channel directs services to their "paying clients."   While a salaried admission officer has a vested interest in attracting students to his institution, his salary does not not depend on the individual student enrolling. The model is different with commission-based agents.

Once you accept commission-based compensation as a practical solution to attract students from around the world, the next question is whether the agents should receive a fixed fee from the parents/students.  Look at the math below and it will you give an answer. 

Let's assume 100 students start the process of looking for a study abroad destination. You or your counselors spend time advising the student and parents and go through the long process of reviewing, selecting, preparing and so forth.  What will your compensation depend upon?  If you only rely on the commission from universities, the only universities you will consider for the students will be universities that pay a commission.  Is that the appropriate choice?  If you send students to Australia, you may be fine since pretty much all Australian universities pay commission. But in the US market, only a minority, a growing minority to be precise, pay commissions.   Not only will agents ignore the highest ranked U.S. universities for their work -- since as a rule they don't need to pay a commission to attract students -- but the parents won't accept such an agent as a counselor.  Only agents with a large number of agreements are attractive to parents since the field of universities to be considered needs to be wide.  

More importantly, how many students will enroll in the end is a highly unpredictable figure. We have not seen any statistically valid surveys showing the percentage of students completing the process, but we know that a large percentage discontinue the process or don't choose to study abroad for many reasons.  An experienced admissions counselor gave us a short list for the most frequent reasons.  

1. Decided to defer study to a later date.

2. Didn't meet English requirements.

3. Financial problems

4. Student switched to work with another agency

5. Student turned down by university of choice.

So what does that mean for an agency financially?  An agency would be working free of charge for a majority of students and income would depend on the placed students.  Take the example below (Chart 1).  If an agent charged $500 per student, revenue would equal $50,000 for advising 100 students.  Remember, you have to start thinking like a business person.  Revenue has to cover rent, office costs, high advertising costs, travel, staffing costs, insurance, website, taxes and much more.  

Profit (agency owner's income) = Revenue - Expenses 

That means if only 20% of the students enroll the agency revenue would be $20,000 instead of the $50,000 revenue generated by the parent fee.   

By the way, we can argue about the appropriate level of agency fees, but that's a question that the market place has to answer. Indian agency fees tend to be lower than Chinese agency fees --- though they are coming down. But it's a question of the perceived value by parents . No different than in the United States where most high schools offer (free) college counseling. Why is the private counseling market thriving?  It offers more personalized help in a field where high school counselors are overworked and have limited time to address the individual students needs.  Customers are willing to pay for service and quality which is no different from parents and students who are willing to pay higher tuition for certain private or out-of state public academic institutions. 

Lastly, I would like to see a university that criticizes double dipping by agents follow that advice. If universities charged only for students who graduate from their institution, we would have established an even playing field. Are you ready to do that? 

* Disclosure: Intead is not a commission-based agency, we provide fee-for service based enrollment strategy, technology and digital marketing services for international enrollment. In a limited number of situations, this work may include signing a commission-based agreement with a university which we use in our collaboration with trusted commission-based agencies in selected countries.