CHAPTER 1

Background

Reference

1.1 On 13 October 2011, the Senate referred the provisions of the Education Services for Overseas Students Legislation Amendment (Tuition Protection Service and Other Measures) Bill 2011, the Education Services for Overseas Students (TPS Levies) Bill 2011 and the Education Services for Overseas Students (Registration Charges) Amendment (Tuition Protection Service ) Bill 2011 to the Senate Standing Legislation Committee on Education, Employment and Workplace Relations for inquiry and report by 1 December 2011.

Conduct of the inquiry and submissions

1.2 The committee initially advertised the inquiry in The Australian on 26 October 2011, calling for submissions by 1 November. Details of the inquiry were placed on the committee website. The committee subsequently sought permission from the Senate to extend the tabling of its report until 27 February 2012, and established a new closing date for submissions, 2 December 2011.

1.3 The committee contacted a number of organisations inviting submissions to the inquiry. Submissions were received from 11 individuals and organisations, as listed in Appendix 1.

1.4 A public hearing was held in Melbourne on 2 February 2012. The witness list for the hearing is at Appendix 2.

Acknowledgement

1.5 The committee thanks those organisations and individuals who contributed to this inquiry by preparing written submissions and giving evidence at the hearing.

Background

1.6 Between August 2009 and March 2010 the Hon Bruce Baird AM conducted a review of the Education Services for Overseas Students (ESOS) Act 2000 (the Act), with a view to improving regulation of Australia's international education sector following an extended period of growth. The review considered the need for enhancements to the Act in four key areas:

i.    Supporting the interests of international students;

ii.    Delivering quality as the cornerstone of Australian education;

iii.   Effective regulation; and

iv.   Sustainability of the international education sector.[1]

1.7 The final report of the Baird review, Stronger, simpler, smarter ESOS: supporting international students, was published in March 2010 and recommended a series of immediate changes designed to improve the experience of international students in Australia.

1.8 The first phase of policy reforms in response to the review's recommendations was enacted on 8 April 2011, following an inquiry and report from this committee. Those reforms focused on strengthening registration, enforcement, risk management and student access to complaints and appeals processes.[2] Further consultation was subsequently undertaken between December 2010 and April 2011, prior to the introduction of this second phase of the Government's response to the review.

1.9 The Baird review also recommended the strengthening of tuition protection arrangements. Specifically, Recommendation 16 of the review supported the establishment of a single tuition protection service (TPS):

16. That ESOS be amended to establish a single Tuition Protection Service that:

a. provides a single mechanism to place students when a provider cannot meet its refund obligations and as a last resort provide refunds

b. allows placement with any appropriate provider

c. makes the cost of being a member of a tuition protection scheme risk based

d. requires providers to regularly maintain student contact details in PRISMS [Provider Registration and International Students Management System] and other information on a risk basis

e. removes providers having ministerial exemptions from membership of a tuition protection scheme.[3]

Purpose of the bills

1.10 Consistent with the above recommendation, the central component of these bills aims to strengthen tuition protection for international students, ensuring that they receive the tuition they have paid for and entitling them to a refund if they do not.

1.11 To achieve this, the bills seek to:

establish a new Tuition Protection Service (TPS). The TPS would function as a single mechanism to place overseas students when providers cannot meet their obligations, or, as a last resort, enable them to access refunds of unexpended money;
limit the refunding of pre-paid course fees to the portion of the course not yet delivered in the event that a course provider should cease operations;
limit the amount of pre-paid course fees providers can collect so as to reduce potential refunds;
require non-exempt education providers to keep initial pre-paid student fees in separate accounts until students commence study, to ensure that refunds are made in cases where study visas are refused;
strengthen providers' record keeping obligations regarding student contact details and academic progress to help support placements and refunds;
establish a national registration system for providers who operate in multiple jurisdictions; and
introduce a series of technical amendments to repeal the Act's re-registration provision, clarify definitions of tuition fees and accepted students, and undertake minor changes which will strengthen enforcement and monitoring options.

The ESOS Act

1.12 The ESOS legislative framework regulates the provision of education and training services to overseas students in Australia. The framework comprises the:

Education Services for Overseas Students Act 2000 (the Act);
Education Services for Overseas Students Regulations 2001 (ESOS Regulations);
National Code of Practice for Registration Authorities and Providers of Education and Training to Overseas Students 2007 (the National Code);
Education Services for Overseas Students (Registration Charges) Act 1997; and
Education Services for Overseas Students (Assurance Fund Contributions) Act 2000;

1.13 The ESOS Act and ESOS Regulations set out legislative requirements for the registration of providers, providers' obligations, operation of the ESOS Assurance Fund, enforcement of the legislative framework and establishment of the National Code.

Key provisions of the Education Services for Overseas Students Legislation Amendment (Tuition Protection Service and Other Measures) Bill 2011

1.14 The Education Services for Overseas Students Legislation Amendment (Tuition Protection Service and Other Measures) Bill 2011 is comprised of eight Schedules. This section outlines some of the key amendments proposed by the Bill.

Schedule 1 – Tuition Protection Service

1.15 The bill seeks to repeal Part 5 of the ESOS Act, which established the ESOS Assurance Fund to protect the interests of overseas students, in its entirety. The repealed Part 5 would be replaced with a new Part 5 intended to deal with the Tuition Protection Service.

1.16 Proposed section 45 of the bill provides a simplified guide to the newly proposed Part 5. Proposed sections 46A to 47H of Division 2 set out the obligations on registered providers in the event of a default by a registered provider, overseas student, or intending overseas student, and include penalties and sanctions that may apply. Division 2 also sets out the obligation on registered providers to provide refunds or alternative courses to students in the event of a default.

1.17 The bill also introduces Part 5A to the Act. Proposed section 51 provides a simplified outline to this proposed part 5A, which would see the establishment of the Overseas Students Tuition Fund (OSTF), the TPS Director and the TPS Advisory Board.

The OSTF would be a Special Account for the purposes of the Financial Management and Accountability Act 1997. It would provide money for refunds under proposed Part 5 of the bill where registered providers fail to discharge their obligations to existing or intending overseas students. The purposes of the OSTF are set out in proposed section 52C of the bill.
The TPS Director would be appointed by the Minister and would be responsible for managing the OSTF and facilitating alternative student placement in the event of a default. Other functions of the TPS Director are set out in proposed section 54B of the bill.
The functions and membership guidelines for the TPS Advisory Board are set out in proposed sections 55B to 55N. Proposed sections 56A to 56G set out guidelines pertaining to meetings of the board.

Consequential amendments

1.18 Section 4A of the Act describes its principal objects. Item 2 of Part 2 of the proposed bill would amend subsection 4A(a) to state that a principal object of the Act would be to provide tuition assurance, and refunds, for overseas students for courses for which they have paid.

1.19 Section 5 of the Act contains definitions. Items 4–19 of Part 2 of the bill seek to insert new definitions and repeal some terms to improve the operation of the Act in line with the proposed TPS.

1.20 Item 39 of the bill makes a consequential amendment to the Tertiary Education Quality and Standards Agency Act 2011, replacing a reference to the 'tuition assurance scheme' with the words 'TPS Director'.

Repeal of the Education Services for Overseas Students (Assurance Fund Contributions) Act 2000

1.21 Part 4 of Schedule 1 of the proposed bill repeals the Education Services for Overseas Students (Assurance Fund Contributions) Act 2000 and replaces it with the Education Services for Overseas Students (TPS Levies) Act 2011.

The Education Services for Overseas Students (TPS Levies) Bill 2011

1.22 The Education Services for Overseas Students (TPS Levies) Bill 2011 outlines requirements for education providers to pay fees and levies designed to fund the TPS.

1.23 The TPS Levies Bill requires education providers to pay an annual TPS levy, money from which would go towards the OSTF established by the ESOS Amendment (Tuition Protection Service and Other Measures) Bill 2011. If providers default and do not meet their responsibilities under the revised ESOS Act, the OSTF would be drawn on to facilitate student placement in an alternative course, or, as a last resort, to pay a refund to the student. These refunds would be equivalent to the portion of the course the student paid for but was not delivered. Should students seek placement in a course of higher value, they would be required to meet the extra costs.[4]

1.24 The bill defines which providers are required to pay the fees and levies and the rates at which they are to be paid. Registration fees are set at $100 plus $2 per enrolment, and base fees at $200 plus $5 per enrolment. The bill also outlines a risk rated premium based on risk of provider default, and a special tuition protection levy which is intended to protect against future sector shock.

1.25 The TPS Levies Bill would provide the TPS Director with the power to set components of the risk rated premium and special tuition protection levy by legislative instrument.

1.26 The Director would be appointed by the Minister and would have statutory responsibility for the TPS Levy and the OSTF under the revised ESOS Act. The Director would thereby have the power to set the annual TPS levy, with advice from the TPS Advisory Board.

1.27 Members of the TPS Advisory Board would be appointed by the Minister. These appointments would be made on the basis of expertise, industry experience and the likely contribution the individual would make towards fulfilling the objectives of the TPS.

1.28 The Board would consist of a maximum of 12 members, drawn from government and industry. Its primary role would be to advise the TPS Director in relation to the determination of the TPS Levy. It would have administrative support from the TPS Secretariat, which would not play a role in student placement.

1.29 The TPS Director would also publish TPS Levy figures annually, and the risk-rated component of the levy set through a legislative instrument.

The Education Services for Overseas Students (Registration Charges) Amendment (Tuition Protection Service) Bill 2011

1.30 The Education Services for Overseas Students (Registration Charges) Amendment (Tuition Protection Service) Bill 2011 seeks to amend the way that registration fees are set by adopting a risk management-driven fee structure. Registration fees are payable by all registered providers of education services for overseas students, and are used to meet the costs of administering the ESOS Act and the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS).

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