Independent study programs may also serve as high-impact educational practices, when done well. Here's a discussion, from today's Inside Higher Ed, about considerations along those lines. A couple of quotes to get you going:
Academic credit should be awarded only for work that advances the education of students, within the curriculum, usually as defined by the faculty as a whole.And now, for the rest of the story...
In situations involving individual arrangements in serious matters (including awarding academic credit), prior approval procedures and written documentation are good practice and protect everyone: the student, the faculty member, and the institution.
Conflicts of interest exist and can be addressed through disclosure and review of proposed activities by disinterested parties.
All three of these principles support the conclusion you’ve reached, which is that individual arrangements between students and faculty members should fall under the general oversight of “the faculty,” not just be idiosyncratic personal arrangements. These arrangements should be documented, reviewed to assure they meet the standards established by the faculty and also reviewed to protect all parties to them. The faculty should be protected against charges of favoritism and capricious grading. Students should be on notice of what is required of them, applicable deadlines and standards that must be met. The academic unit should have records sufficient to document the award of academic credit meeting institutional standards.