BILLS DIGEST NO. 3, 2019–20              15 July 2019

Higher Education Support Amendment (Cost Recovery) Bill 2019 [and] Higher Education Support (Charges) Bill 2019

Dr Hazel Ferguson
Social Policy Section  

Date introduced: 4 July 2019

House:  House of Representatives

Portfolio: Education

Commencement: 1 January 2020, except Part 2 of Schedule 1 of the Higher Education Support Amendment (Cost Recovery) Bill 2019, which commences at the same time as the Higher Education Support (Charges) Act 2019 (the Charges Act), but does not commence at all if the Charges Act does not commence.

Links: The links to the Bills, its Explanatory Memoranda and second reading speeches can be found on the home pages for the Higher Education Support (Charges) Bill 2019 and Higher Education Support Amendment (Cost Recovery) Bill 2019 or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at July 2019.

History of the Bills

The Higher Education Support (Charges) Bill 2018 (the first Charges Bill) and the Higher Education Support Amendment (Cost Recovery) Bill 2018 (the first Cost Recovery Bill) (collectively the 2018 Bills) were introduced into the House of Representatives on 19 September 2018. The 2018 Bills were debated in the House on 4 December 2018 but did not progress, and lapsed when the Parliament was prorogued on 11 April 2019.[1]

The Higher Education Support (Charges) Bill 2019 (the Charges Bill) and the Higher Education Support Amendment (Cost Recovery) Bill 2019 (the Cost Recovery Bill) (collectively the Bills), which were introduced into the House on 4 July 2019, are in near-equivalent terms to the 2018 Bills. The only difference is the commencement date, which is proposed to be 1 January 2020, in recognition that the 1 January 2019 commencement proposed in the 2018 Bills has now passed. The 2019–20 Budget delayed the introduction of the charges by 12 months, to January 2020.[2]

A Bills Digest was prepared for the 2018 Bills.[3] Much of the material in this Bills Digest has been sourced from that earlier one.

Purpose of the Bills

Together, the Charges Bill and the Cost Recovery Bill propose to give effect to a 2018–19 Budget measure to introduce partial cost recovery arrangements for higher education providers whose students access the Higher Education Loan Program (HELP).[4]

These arrangements comprise two new charges:

•       an annual higher education provider charge to partially recover the cost of administering HECS-HELP and FEE-HELP and

•       an application fee to be paid by registered higher education providers seeking to become FEE-HELP providers, to recover the cost of administering the FEE-HELP application process.[5]

The Higher Education Support (Charges) Act 2019 (when enacted) will introduce the annual higher education provider charge, the amount of which will be specified in, or worked out in accordance with, Regulations to be made by the Governor-General.

The Cost Recovery Bill proposes to amend the Higher Education Support Act 2003 (HESA) to enable the relevant Minister (currently the Minister for Education) to require payment of the application fee, and enable the Department of Education (DoE) to administer the annual provider charge under the Higher Education Provider Guidelines 2012 (the Guidelines), which are made by the Minister under section 238–10 of HESA.

The Bills do not specify the amounts to be charged, or methods for working out the charges—this will be in the respective Regulations.

Background

The Australian Government Charging Framework

Regulatory cost recovery is dealt with under the Australian Government Cost Recovery Guidelines (the CRGs), which form part of the Australian Government Charging Framework (the Charging Framework). The Charging Framework aims to improve consistency of charging, including when it is appropriate for the Government to charge for its activities.[6] According to the CRGs:

The Australian Government’s overarching cost recovery policy is that, where appropriate, non-government recipients of specific government activities should be charged some or all of the costs of those activities.[7]

Under the CRGs, the appropriateness of cost recovery from a given activity is assessed based on the nature of the activity, who is to be charged, the impact of cost recovery on competition, innovation or financial viability, the efficiency of administering the cost recovery, and any effect on the policy outcomes of the activity, as well as obligations under treaties, policies and legislation.[8] 

The CRGs recommend full cost recovery but acknowledge partial cost recovery, while less common, may be appropriate when:

·         charges are being ‘phased in’

·         full cost recovery would be inconsistent with community service obligations endorsed by the Australian Government

·         the Australian Government has made an explicit policy decision to charge for part of the costs of an activity.[9]

Under the CRGs, ‘charges imposed when a good, service or regulation is provided to a group of individuals or organisations (for example, an industry sector) rather than to a specific individual or organisation’ are a ‘cost recovery levy’.[10]

A cost recovery levy is a tax and is imposed via a separate taxation Act. It differs from general taxation as it is ‘earmarked’ to fund activities provided to the group that pays the levy.[11]

A cost recovery implementation statement (CRIS) is required before charges commence.[12] The Explanatory Memorandum to the Cost Recovery Bill states that this will be completed before the Regulations are introduced.[13] On 31 October 2018, the then Department of Education and Training (DET) released a draft Cost Recovery Implementation Statement: cost recovery activities for the HECS-HELP and FEE-HELP programs financial year 2018–19 (the draft CRIS) for comment. The draft CRIS details the regulatory costs associated with DET’s (now DoE’s) management of FEE-HELP provider applications and ongoing regulatory activities related to higher education providers under HESA, as well as a proposed fee structure.[14]

Commonwealth higher education funding under the Higher Education Support Act 2003

HESA provides the legislative framework for Commonwealth funding for higher education institutions. Although institutions have access to other sources of funding, the major higher education funding programs are under HESA, including HELP loans to students, the Commonwealth Grant Scheme (CGS), which subsidises tuition costs for ‘Commonwealth supported places’ (CSPs), research grants under the Other Grants Guidelines (Research) 2017, and ‘Other Grants’, as set out in the Other Grants Guidelines (Education) 2012, such as funding for equity programs under the Higher Education Participation and Partnership Program.

Providers must meet financial viability, policy standards and probity of key staff requirements to maintain their status as an approved higher education provider under HESA, and DoE monitors compliance with these requirements.[15]

Access to funding is controlled according to provider type in HESA:

•       Australian public universities, listed in Table A in section 16–15, have access to all Australian Government grants under HESA, and their eligible students can access all HELP loans

•       universities listed in Table B in section 16–20 can access some Australian Government grants as outlined in section 41–10, and their eligible students can access FEE-HELP, and in some cases HECS-HELP[16]

•       universities listed in Table C in section 16–22 and other approved non-university higher education providers (NUHEPs) are not eligible for Australian Government grants under HESA, but their students can access FEE-HELP.

Thus, the only program that is broadly available to all approved higher education providers under HESA is FEE-HELP. Consistent with this, for NUHEPs, approval under HESA is dealt with by DoE as a FEE-HELP Provider Application.[17] This means that applying cost recovery to FEE-HELP providers captures all higher education providers with access to Commonwealth funding.

The Higher Education Loan Program

HELP is currently made up of four student loan schemes which allow eligible students to defer the cost of approved tertiary education courses at approved providers, with loans repaid through the Australian Taxation Office (ATO) when a debtor’s income is more than the minimum repayment threshold.[18] The loan schemes are:

•       HECS-HELP, available for Commonwealth supported higher education students (usually domestic undergraduate students studying at Australian public universities) to pay their student contribution amounts (the part of the course fee not paid by the Commonwealth)

•       FEE-HELP, available for domestic full fee-paying higher education students to pay course fees, up to a lifetime borrowing limit

•       OS-HELP, which is available for eligible Commonwealth-supported higher education students undertaking part of their course overseas and

•       SA-HELP is available to students wishing to defer payment of the student services and amenities fee, which higher education providers charge for non-academic student services and amenities.[19]

A similar scheme, VET Student Loans, is also available to Vocational Education and Training (VET) students studying an approved course at an approved training provider.[20] VET Student Loans was introduced as a HELP sub-scheme to replace VET FEE-HELP from 2017. However, the Education and Other Legislation Amendment (VET Student Loan Debt Separation) Act 2018 separated VET Student Loans from HELP as of 1 July 2019. As outlined below, cost recovery arrangements are already in place for VET Student Loans.

The role of the Higher Education Loan Program in provider operations

HELP constitutes a significant source of revenue for higher education providers. In 2017 (the latest year for which statistics have been published), university and non-university higher education providers’ students collectively deferred over 90 per cent of their eligible fees through HECS-HELP and FEE-HELP. This amounted to just under $6.0 billion revenue to providers (see Table 1 below), or 15.8 per cent of $37.9 billion total sector revenue.[21]

Table 1: Fee amounts charged and amounts deferred through HECS-HELP and FEE-HELP, all higher education providers, 2017

Total charges

HELP debt

HELP debt as percentage of amount charged

Commonwealth supported domestic students

(HECS-HELP eligible)

$4,995,126,811

$4,467,327,781

89.4%

Fee-paying domestic students

(FEE-HELP eligible)

$1,540,667,896

$1,506,160,144

97.8%

Total

$6,535,794,707

$5,973,487,925

91.4%

Source: Parliamentary Library calculations based on DoE, ‘2017 Section 5 Liability status categories: Table 5.8: Amounts Charged, Paid
Up-front, and Debt amount(a) by Higher Education Institution and Loan type, Full Year 2017, $’, Higher education liability status categories tables for the 2017 full year, DoE website, 14 September 2018.

In order to provide their students with access to HELP, higher education providers must undertake a range of functions to administer the program. Generally, this involves providing information to students, appropriate officers of the provider handling requests for Commonwealth assistance (essentially the application for a HELP loan), and providing estimates of student loan amounts and then actual student numbers to DoE in order to facilitate the processing of payments. In cases where the student applies to have their HELP debt cancelled for a unit, an officer of the provider will act as the delegate of the Secretary in handling the initial application:

Where a student seeks remission of their HELP debt, they must apply to their provider in the first instance, who as a delegate of the Secretary, decides on the application. If the student disputes the provider’s decision, they can apply for an internal review of the decision and this can be conducted and decided by the provider.[22]

Current cost recovery arrangements in the Higher Education Loan Program

Cost recovery arrangements were introduced to HELP in the VET Student Loans in 2017, prior to the separation of VET Student Loans from HELP. Charges include an application fee, enabled by section 31 of the VET Student Loans Act 2016, and a provider charge levied on approved providers as a tax under the VET Student Loans (Charges) Act 2016. Like the arrangements proposed in the Charges Bill and the Cost Recovery Bill, the charges are set in regulations. Currently:

•       under the VET Student Loans (Approved Course Provider Application Fee) Determination 2017, the fee for making an application for approval as an approved course provider is $5,110 and

•       under the VET Student Loans (Charges) Regulations 2017 there are three levels of annual provider charge based on the size of the provider in the relevant financial year: $1,280 for small providers with fewer than 200 VET Student Loans students; $12,480 for medium providers with between 200 and 1,000 VET Student Loans students; and $62,870 for large providers, with more than 1,000 VET Student Loans students.[23]

No cost recovery charges for HELP currently apply to higher education providers. The only administrative charge currently in place in the higher education HELP schemes is the 25 per cent loan fee paid by some undergraduates accessing FEE-HELP—because FEE-HELP is for students who are not in CSPs, which are generally offered to undergraduate students enrolling at public universities, these undergraduates are almost always at NUHEPs.[24] Although this loan fee is intended to recover some of the costs of providing FEE-HELP loans to students at favourable terms, with, for example, the 2008 Review of Australian Higher Education chaired by Professor Bradley stating that the fee is ‘intended to recover some of the costs to the Commonwealth associated with the repayment subsidies’, this is to be distinguished from regulatory cost recovery as per the CRGs.[25]

The purpose of the Higher Education Loan Program

The expansion of cost recovery into HECS-HELP and FEE-HELP raises questions about the purpose of the program—specifically, which ‘group of individuals or organisations’ the ‘good, service or regulation’ is being provided to, as per the CRGs.[26]

Since the introduction of the precursor to HELP, the Higher Education Contribution Scheme (HECS) in 1988, governments have described the purpose of higher education student loans variously as a way to reduce cost to government, and ensure access for students. That is, the role of HELP for providers has not been foregrounded.[27]

For example, at the introduction of the legislation to create HECS in 1988, the Higher Education Funding Act 1988, then Minister for Employment, Education, and Training, John Dawkins, stated in his second reading speech:

To help finance the substantial expansion in the funding of higher education that was announced in the Budget, the Bill makes provision for the establishment of the higher education contribution scheme (HECS). HECS will apply to study in award courses undertaken in higher education institutions from 1 January 1989. People who benefit from participation in higher education will be required to make a small contribution towards the cost of their study.

...The higher education contribution scheme is an essential part of the Government's plans for expansion and development of the higher education system. In financial terms it will raise more than one-third of the additional funding for the 1989-91 triennium allocated to higher education in this Budget. The size of this contribution will grow in future years. Just as important, the scheme will increase the fairness of funding arrangements for higher education, ensuring that the total burden of funding does not fall entirely on the taxpayer.[28]

In 2003, when the passage of HESA increased access to higher education student loans through the creation of HELP, Dr Brendan Nelson, then Minister for Education, Science and Training, stated:

One of the most important changes in these reforms is the recognition that, as the world and the needs of Australian universities are changing, Australians should be no less free to take up, if they are academically qualified, a full fee paying place in an Australian university than a citizen from another country. The government will allow the universities, once they have filled all of their HECS places and if they choose to, to then offer a full fee paying place to an Australian citizen who is academically qualified and considered to be so by the university. For the first time, the Commonwealth government will lend those students money on the same income contingent arrangements as HECS.[29]

More recently, in 2014, in his second reading speech introducing the Higher Education and Research Reform Amendment Bill 2014, Christopher Pyne, then Minister for Education, argued:

Most people would agree that HELP is the best loan you would get in your life—for the best investment that most people will ever make in themselves.

It is a good deal. It is the best deal an Australian will ever get. Australian university graduates on average earn up to 75 per cent more than those who do not go on to higher education after secondary school. Over their lifetime graduates may earn around $1 million more than if they had not studied at university. It is only fair that they pay a reasonable share of what it costs the taxpayer.[30]

Research into the benefits of higher education funding has tended to follow this logic, with analysis of returns on education investment typically comparing individual benefits with those to the economy as a whole (public versus private benefit), rather than considering the benefit the provider may gain from students being able to access the loan.[31]

Committee consideration

Senate Education and Employment Legislation Committee

The Senate Selection of Bills Committee has recommended that the Charges Bill and Cost Recovery Bill not be referred to committee.[32]

The 2018 Bills were referred to the Senate Education and Employment Legislation Committee for report by 23 November 2018. Details of the inquiry are available from the inquiry homepage.

The Committee recommended that the Senate pass the 2018 Bills, but encouraged ‘the department to continue consulting with key stakeholders to ensure the final implementation is fair and equitable.’[33]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bills.

The Committee considered the 2018 Bills and, in relation to the first Charges Bill, sought advice from the Minister about why limits on the annual provider charge are not specified in primary legislation and whether the method of calculation of a maximum charge could be included in the Bill.[34] The Scrutiny Digest states:

One of the most fundamental functions of the Parliament is to impose taxation (including duties of customs and excise). The committee's consistent scrutiny view is that it is for the Parliament, rather than makers of delegated legislation, to set a rate of tax.

… Where charges are to be prescribed by regulation the committee considers that, at a minimum, some guidance in relation to the method of calculation of a maximum charge should be provided on the face of the primary legislation, to enable greater parliamentary scrutiny.[35]

The Minister’s response, provided 16 November 2018, states:

[T]he purpose of setting the amount of the charge for a year via a legislative instrument is to ensure that the charge can be reviewed and updated annually, which will assist providers by giving them certainty on the annual charge amounts for each calendar year.

In addition, there is existing legislation (VET Student Loans (Charges) Act 2016) for similar annual charge on VET Student Loans approved course providers that does not provide a limit on the charge, and the amounts for the charge are set out in legislative instrument. This sets a precedent, which was used to guide the development of the Charges Bill.[36]

In relation to the first Cost Recovery Bill, the Committee sought advice from the Minister about why it is necessary and appropriate for the rate of the late penalty, and review of decisions made about the collection and recovery of the annual provider charge, to be set out in delegated legislation, and why the Bill does not require that the Guidelines make review rights available.[37] The Scrutiny Digest states:

The committee's view is that significant matters, such as the amount of a penalty or the review of decisions relating to the collection and recovery of the higher education provider charge, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided.[38]

In response, the Minister reiterated the points cited above about the need for the flexibility provided by subordinate legislation, as compared with pursuing amendments through primary legislation, and again pointed to the VET Student Loans (Charges) Act 2016 as precedent.[39]

However, the Minster’s response did undertake to ensure that review rights are included in the Guidelines.[40]

Policy position of non-government parties/independents

At the time of writing, no non-government parties or independents have comments on the Bills.

In respect to the 2018 Bills, Labor Senators' additional comments in the report of the Senate Education and Employment Legislation Committee stated:

Labor won’t oppose these bills because of the very small impact they will have on the sector, especially in the context of our policies to properly fund the sector.

Labor has concerns about how the charges and other aspects of the bill will operate over the long term.

Labor will seek assurances that the new scheme must ensure there is not a negative impact on students—it is simply not fair for any of these small additional charges to flow through to students or undermine equity in Australia’s university system.[41]

Australian Greens Senators' dissenting report in the Senate Education and Employment Legislation Committee’s report on the 2018 Bills recommended the Bills not proceed, citing insufficient consultation and ‘a worrying continuation in this Government’s larger pattern of defunding the higher education sector and shifting the costs of providing higher education away from the Commonwealth.’[42]

Position of major interest groups

Most key stakeholders issued statements in response to the 2018 Bills, and made submissions to the Senate Standing Committee for the Scrutiny of Bills inquiry into these, but have not separately addressed the current Bills.

Universities Australia (UA), the national representative body for Australian universities, stated that the Bills do not provide sufficient detail about how the new charging arrangements would operate, stating:

The legislation seeks very broad Ministerial powers to tax higher education providers … This would be a significant change from current legislative funding arrangements. It would place such decisions in the hands of the Minister rather than the Parliament.[43]

The Group of Eight (Go8) research intensive universities, said in a submission to the Senate Standing Committee on Education and Employment inquiry into the 2018 Bills:

In total this is a demonstrably pernicious policy; it is a tax on public institutions dressed up as recouping administrative costs. The Go8 therefore registers its strong objections to the Government’s unacceptable policy proposal.[44]

The Innovative Research Universities (IRU) grouping urged the Senate to oppose the annual provider charge, arguing:

Charging providers for students’ use of HECS-HELP and FEE-HELP is to avoid recovering costs from those who actually use the schemes – the students. This shows the fundamental error underlying the charge as created in the Bills. The Government - rightly - will not charge students directly for access to HELP. Yet it will, instead, penalise students by further reducing the resources universities and other higher education providers have to deliver students a good education.

The IRU members would not deny their students access to HELP nor does the IRU propose that students should pay to access HELP. Rather, as a Government program that reduces Government direct expenditures on higher education the Government should bear the cost. 

In effect the Statement acknowledges that the Government’s schemes to assist students rely heavily on universities and other providers to operate. The Government ought to pay universities and other providers for the cost of this service, which would be true cost recovery. Instead, it wishes to charge universities and other providers for the benefit of assisting the Government implement its programs for students.[45] 

The Council of Australian Postgraduate Associations (CAPA), which aims to protect and further the interests of postgraduate students, is not supportive of the proposed fees. In response to the 2018 Bills, CAPA indicated that it considers the proposed fees minor in comparison to the overall budget position of universities:

The amounts levied are minimal compared to overall university budgets, and so, while these levies are unwelcome, they are not a cause of major upset to universities. Of more concern to universities and students is the impact of successive cuts, which over time erodes the quality of university education.[46]

CAPA issued a further media release in response to the Bills on 4 July 2019, stating:

This tax will end up being passed to students, either through an increase in fees for postgraduate and international students, or through a reduction in services available to students.[47]

The Independent Tertiary Education Council Australia (ITECA), previously the Australian Council for Private Education and Training (ACPET), which represents private providers of tertiary education and training, stated in its budget media release:

Without addressing the funding demise, moving the regulators to full cost recovery will see more college closures and disruption for students. For higher education providers they have already been locked out of access to government funded places and their students are required to pay a 25% fee University students don’t have to pay, so increased fees will shift more costs to students.[48]

Independent Higher Education Australia (IHEA), previously the Council of Private Higher Education (COPHE), which represents private higher education providers, said in a submission to the Senate Standing Committee on Education and Employment inquiry into the 2018 Bills that it was unable to support the Bills, on the basis of a lack of consultation and information, and concerns about adding to cost burdens on students, particularly FEE-HELP students already paying the 25 per cent loan fee.[49]

The Grattan Institute’s submission to the Senate Standing Committee on Education and Employment inquiry into the 2018 Bills observed:

Conceptually, it is not clear that HELP’s cost recovery should be from higher education providers. HELP is a government program that aims to assist students, and they are its main beneficiaries. The providers assists with HELP’s implementation, rather than HELP being a service provided to them.[50]

Given that HELP is assistance to students, the submission states:

… it might be argued that… it is the providers who are providing a service to the Department in managing a substantial part of the process of students applying for HELP… If HELP cost recovery is to be pursued as a policy objective, a student charge added to their HELP loan may more closely match the cost recovery policy.[51]

Financial implications

The Explanatory Memorandum to the Cost Recovery Bill states:

The annual charge which is based on partial cost recovery is expected to deliver savings of $11.4 million in fiscal balance terms over the forward estimates (2019-20 to 2022-23).The application fee which is based on full cost recovery is expected to deliver saving of $0.3 million over 2019-20 to 2022-23. Thereby the HELP cost recovery measures provide an estimated combined saving of $11.7 million over 2019-20 to 2022-23.[52]

This represents a slightly lower expected saving than presented in conjunction with the first Cost Recovery Bill, which cited expected savings of $14.1 million over 2018–19 to 2021–22, including $13.8 million from 2019–20 to 2021–22 from the annual charge, and $0.3 million over 2018–19 to 2021–22 from the application fee.[53]

The Explanatory Memorandum to the Charges Bill repeats the partial cost recovery savings figures for the annual higher education provider charge:

The annual charge, which is based on partial cost recovery, is expected to deliver a saving of $11.4 million in fiscal balance terms over the forward estimates (2019-20 to 2022-23).[54]

The 2019–20 Budget attributed a drop in revenue to the 12 month delay in the introduction of this measure.[55]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.[56]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights had not examined the Bills, but had reported that the 2018 Bills did not raise human rights concerns.[57]

Key issues and provisions

Higher Education Support (Charges) Bill 2019

The higher education provider charge

The Charges Bill sets out a framework to enable the Minister to impose the higher education provider charge under the proposed Higher Education Support (Charges) Act 2019 (the Charges Act).

Clause 4 specifies that the Act does not impose a tax on property of any kind belonging to a state.

Clause 5 is the dictionary. Most importantly, it specifies that the term higher education provider is to have the same meaning as in HESA. This definition is the part of the Charges Bill that limits the application of the higher education provider charge to providers that are approved to receive Commonwealth funding under HESA, including universities and NUHEPs. There are approximately 23 higher education providers registered to provide higher education under the Tertiary Education Quality and Standards Agency Act 2011 (the TEQSA Act), that have not taken the step of applying to become an approved higher education provider under section 16 of HESA to access Commonwealth funding, and thus will be exempt from the charge.[58]

The dictionary also defines the terms higher education provider charge as a charge imposed by clause 6, property of any kind belonging to a State according to subclause 4(2), which refers to the meaning in section 114 of the Constitution, and year as calendar year.

Clause 6 of the Charges Bill imposes the charge on a body that is a higher education provider at any time during the (calendar) year.

Subclause 7(1) specifies that the amount of the charge is to be set out in Regulations, either by prescribing the amount or the method of calculation.

The Explanatory Memorandum to the Charges Bill states:

The amount of the annual charge will be specified in regulations. It is anticipated the amount of the charge will differ depending on the size of the provider (determined by the number of enrolments per year), recognising the impost of such a charge on smaller providers. Prior to the introduction of the regulations, a fees schedule will be determined that is consistent with the Australian Government Cost Recovery Guidelines and documented in a cost recovery implementation statement (CRIS).[59]

Subclause 7(2) of the Charges Bill specifies that before the regulations are made, the Minister must be satisfied that the cost recovered by the higher education provider charge will be no more than the Commonwealth’s likely costs in connection with the administration of HESA. It is notable that this does not strictly limit cost recovery to the Commonwealth’s costs in connection with the administration of the HELP program. Instead, it appears to cover the administration of HESA as a whole. Subclause 7(3) allows that the Regulations may provide for indexation of amounts specified in the Regulations.

Clause 8 allows the Regulations to provide for exemptions from the higher education provider charge. The Explanatory Memorandum does not provide any additional detail about the circumstances or classes of providers that might be covered by such an exemption.[60]

Clause 9 of the Charges Bill deals with making Regulations under the Act. It specifies that the Governor-General may make Regulations prescribing matters required or permitted by the Act, or necessary or convenient to give effect to the Act.

The draft CRIS indicates ‘[t]he Government has currently determined the costs of administering payments, general administration and compliance will not be recovered from providers.’[61]

The draft CRIS proposes to recover, through the annual provider charge, costs associated with:

•       stakeholder engagement and responses to enquiries and complaints—based on the process costs per activity outlined in the draft CRIS, these activities are driven by student numbers and

•       provider management, as well as monitoring and assessment of compliance and financial viability—based on the process costs per activity outlined in the draft CRIS, these activities are driven by provider type, with DoE undertaking more monitoring and assessment tasks for NUHEPs and Table C universities.[62]

The proposed annual provider fee structure presented in the draft CRIS is outlined in Table 2 below, however the Bills do not specify the amounts to be charged, or methods for working out the charges—this will be in the respective Regulations. The draft CRIS indicates the annual charge could change in future as the complexity of DoE’s regulatory activities is reduced through improved provider compliance.[63]

Table 2: Proposed fee structure for the annual charge for approved higher education providers (2019)

Activity Group

Activity driver

Annual Charge Estimate

Stakeholder engagement and Enquiries (via telephone, email, webform and through Ministerial correspondence)

Number of students registered with a provider

$1.82 per registered student for the provider

Provider management and compliance

(NUHEPs and Table C universities)

Number of students registered with a NUHEP/Table C provider

$13.18 per registered student at the NUHEP/Table C provider

Provider financial viability

(NUHEPs and Table C universities)

Risk assessment and risk management, based on assessment of a NUHEP or Table C provider as:

•   high risk (or not assessed yet)

•   medium risk or

•   low risk.

Based on risk assessment:

•   Low: $544

•   Medium: $1,631

•   High (or not assessed yet): $2,719

Provider management, compliance and financial viability

(Table A and B universities)

Delivered equally across all universities

$26,207 per university

Source: Adapted from DET, Cost Recovery Implementation Statement: cost recovery activities for the HECS-HELP and FEE-HELP programs financial year 2018–19, draft for consultation, 31 October 2018, p. 14.

The draft CRIS does not indicate that the per-student components of this charge would be calculated based only on HECS-HELP and FEE-HELP students. Parliamentary Library calculations, based on 2017 all student numbers, suggest charges under this proposed fee structure, if implemented, would range from approximately $30,000 to $250,000 per calendar year for universities, and from under $1,000 to just over $100,000 for NUHEPs.[64]

It should be noted that, under the current provisions of HESA, higher education providers would not be able to recover the cost of the annual higher education provider charge through increases to the fees paid by students using HECS-HELP, since these fees are capped under section 169–15, which requires a Commonwealth supported student to pay the student contribution amount for a unit, and section 93–10 of HESA, which sets out the maximum student contribution amounts and allows for their indexation under Part 5-6 of Chapter 5 of HESA.[65] Under subsection 36–30(1) a domestic undergraduate studying at a Table A university must be enrolled as a Commonwealth supported student, and as such would normally be eligible for HECS-HELP.

Administration requirements for the higher education provider charge under HESA are addressed in the Cost Recovery Bill, as outlined below.

Higher Education Support Amendment (Cost Recovery) Bill 2019

The higher education provider application fee

Section 16–25 of HESA sets out how bodies are approved as higher education providers by the Minister following an application. Section 16–40 specifies that an application must be in writing, cannot be made within six months of an unsuccessful application, must be in the form approved by the Minister, and accompanied by the information requested by the Minister.

Part 1 of the Cost Recovery Bill proposes to amend section 16–40 to enable the Minister to charge an application fee as part of these arrangements.

Item 1 inserts proposed paragraph 16–40(2)(c) so that an application ‘must be accompanied by the fee (if any) prescribed by, or worked out in accordance with the method prescribed by, the Higher Education Provider Guidelines’. Including the fee at application stage means providers that make an unsuccessful application will still be liable to pay the fee, and the fee could be charged again for any subsequent applications.

The Explanatory Memorandum to the Cost Recovery Bill states that the fee will be ‘a flat fee on prospective FEE-HELP providers’.[66] However, the note to proposed paragraph 16–40(2)(c) clarifies that the Guidelines ‘may prescribe different fees, or methods, for applications made by different kinds of applicant’.

Item 2 inserts proposed subsection 16–40(3) into HESA which specifies that the provider application fee is not to be levied in such a way as to amount to taxation.

The draft CRIS proposes a FEE-HELP provider application fee (for providers not currently approved under HESA) of $12,926.00 (rounded), to fully recover the cost for DoE to:

•       receive and register an application

•       check for completeness

•       assess the application, which involves:

–      a financial performance check

–      fit and proper person checks

–      assessment and moderation

–      assessment oversight

–      decisions and notifications.[67]

Arrangements for administering the higher education provider charge

Part 2 of the Cost Recovery Bill deals with those elements of the higher education provider charge not addressed in the Charges Bill.

Subdivision 19-E of HESA sets out the compliance requirements for higher education providers under the Act.

Item 3 inserts a new section into Subdivision 19-E to set out the compliance requirements for the higher education provider charge. Proposed subsection 19–66(1) provides that a higher education provider must pay the higher education provider charge and any late payment penalty imposed by the Higher Education Support (Charges) Act 2018 (when enacted) when it is due and payable. Proposed subsection 19–66(2) would add to the range of matters the Higher Education Provider Guidelines can make provision for:

•       notices setting out the higher education provider charge amount payable, and to whom the charge is payable

•       the higher education provider charge due date, and extensions of this date

•       late payment penalties

•       refund, remission, or waiver of the higher education provider charge or late payment penalties

•       review of decisions in relation to the collection or recovery of the higher education provider charge

•       any other matters relating to the collection or recovery of the higher education provider charge.

Item 4 proposes to add the definition of higher education provider charge to the dictionary at Schedule 1 of HESA meaning a ‘charge imposed by the Higher Education Support (Charges) Act 2018’.

Concluding comments

These Bills propose to give effect to a 2018–19 Budget commitment to introduce partial cost recovery arrangements to HECS-HELP and FEE-HELP, bringing arrangements for higher education providers into line with those already in place for approved VET Student Loans providers.

As with the introduction of cost recovery charges to VET Student Loans, the lack of legislative control on the approach to setting the charges and the maximum amount of the charges has raised concern among some stakeholders. While the Charging Framework does impose some limitations, in particular specifying that the charges should represent the efficient cost of the regulatory activity, implementation arrangements are still undergoing consultation.[68]

Additionally, despite the revenue providers attract from HELP, with the exception of cost recovery in the VET Student Loans from 2017, there appears to be little precedent to draw on to evaluate the proposition that ongoing administration of HELP is a regulatory activity for higher education providers. Instead, some institutions have argued that they act as intermediaries between the government and students, to whom the service is being provided. To the extent that government deals directly with students to administer the program, it is not clear that higher education providers should be liable for this cost.

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[1].              Parliament of Australia, ‘Higher Education Support (Charges) Bill 2018 homepage’, Australian Parliament website; Parliament of Australia, ‘Higher Education Support Amendment (Cost Recovery) Bill 2018 homepage’, Australian Parliament website.

[2].              Australian Government, ‘Part 1: revenue measures’, Budget measures: budget paper no. 2: 2019–20, 2 April 2019, p. 7.

[3].              H Ferguson, Higher Education Support Amendment (Cost Recovery) Bill 2018 [and] Higher Education Support (Charges) Bill 2018, Bills digest, 46, 2018–19, Parliamentary Library, Canberra, 2018.

[4].              Australian Government, ‘Part 1: revenue measures’, Budget measures: budget paper no. 2: 2018–19, 8 May 2018, p. 10.

[5].              Ibid.

[6].              Department of Finance (DoF), ‘Australian Government Charging Framework’, DoF website, last updated 15 May 2017.

[7].              DoF, Australian Government cost recovery guidelines, Resource Management Guide no. 304, 3rd edn, July 2014, p. 5.

[8].              Ibid., pp. 5–6.

[9].              Ibid., p. 6.

[10].              Ibid., p. 2.

[11].              Ibid.

[12].              Ibid., p. 15.

[13].              Explanatory Memorandum, Higher Education Support Amendment (Cost Recovery) Bill 2019, p. 2.

[14].              Department of Education and Training (DET), Cost Recovery Implementation Statement: cost recovery activities for the HECS-HELP and FEE-HELP programs financial year 2018–19, draft for consultation, DET, Canberra, 31 October 2018.

[15].              Ibid., p. 8.

[16].              HECS-HELP is only available to students at Table B providers approved to offer National Priority places, when the student is enrolled in a Commonwealth Supported Place under these arrangements.

[17].              Department of Education (DoE), ‘Applying to become a higher education provider’, DoE website.

[18].              An overview of the HELP loans is available from C Ey, Higher Education Loan Program (HELP) and other student loans: a quick guide, Research paper series, 2016–17, Parliamentary Library, Canberra, updated 2 May 2017.

[19].              Ibid., pp. 2–3; The FEE-HELP borrowing limit for 2019 is $150,000 for medicine, dentistry and veterinary science students and $104,440for other students, according to the DoE, ‘FEE-HELP’, StudyAssist website. Under the provisions of the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018, from 1 January 2020 the FEE-HELP limit will apply to all HELP loans but will be ‘renewed’ as the debtor pays down their balance from the 2019–20 financial year onwards.

[20].              DoE, ‘VET student loans’, DoE website, last modified 3 July 2019. Approved courses are higher-level VET qualifications, including diploma, advanced diploma, graduate certificate or graduate diploma, as set out in DoE, ‘VET student loans’, StudyAssist website.

[21].              DoE, Higher education liability status categories tables for the 2017 full year, DoE website, 14 September 2018; Tertiary Education Quality and Standards Agency (TEQSA), Statistics report on TEQSA registered higher education providers, TEQSA, Melbourne, Vic., 2018, p. 45.

[22].              DET, Cost Recovery Implementation Statement: cost recovery activities for the HECS-HELP and FEE-HELP programs financial year 2018–19, op. cit., p. 10.

[23].              More information about cost recovery in the VET Student Loans is available in DET, Cost Recovery Implementation Statement: cost recovery activities for the VET Student Loans program, DET, December 2017.

[24].              Ey, Higher Education Loan Program (HELP) and other student loans: a quick guide, op. cit., p. 2.

[25].              D Bradley, P Noonan, H Nugent and B Scales, Review of Australian higher education: final report, (Bradley Review), Department of Education, Employment and Workplace Relations (DEEWR), Canberra, December 2008, p. 168.

[26].              DoF, Australian Government cost recovery guidelines, op. cit., p. 2.

[27].              However, it should be acknowledged that in the Vocational Education and Training (VET) sector, this dynamic has been disrupted to some extent by the activities of unscrupulous providers, which brought attention to the role of HELP as a way to attract students and grow revenue. For more information about the fallout from unscrupulous providers in VET, see M Warburton, The VET FEE-HELP debacle: helping its victims and lessons for administration, LH Martin Institute, Melbourne, December 2016; J Griffiths, VET Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016, Bills digest, 41, 2016–17, Parliamentary Library, Canberra, 2016.

[28].              J Dawkins, ‘Second reading speech: Higher Education Funding Bill 1988’, House of Representatives, Debates, 3 November 1988, p. 2402.

[29].              B Nelson, ‘Second reading speech: Higher Education Support Bill 2003’, House of Representatives, Debates, 17 September 2003, p. 20243.

[30].              C Pyne, ‘Second reading speech: Higher Education and Research Reform Amendment Bill 2014’, House of Representatives, Debates, 28 August 2014, p. 8898.

[31].              For example, see A Daly, P Lewis, M Corliss, and T Heaslip, The private rate of return to a university degree in Australia, The Centre for Labour Market Research, University of Canberra, pp. 1–16; Deloitte Access Economics, Estimating the public and private benefits of higher education, report prepared for the Department of Education and Training, November 2016.

[32].              Senate Selection of Bills Committee, Report, 2, 2019, The Senate, 4 July 2019, p. 4.

[33].              Senate Education and Employment Legislation Committee, Higher Education Support (Charges) Bill 2018 [Provisions], Higher Education Support Amendment (Cost Recovery) Bill 2018 [Provisions], The Senate, November 2018, p. 29.

[34].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 12, 2018, The Senate, 17 October 2018, pp. 6–7.

[35].              Ibid.

[36].              Senate Standing Committee for the Scrutiny of Bills, Ministerial responses, 14, 2018, The Senate, Canberra.

[37].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 12, op. cit., p. 9.

[38].              Ibid., p. 8.

[39].              Senate Standing Committee for the Scrutiny of Bills, Ministerial responses, 14, op. cit., pp. 10–11.

[40].              Ibid., p. 11.

[41].              Senate Education and Employment Legislation Committee, Higher Education Support (Charges) Bill 2018 [Provisions], Higher Education Support Amendment (Cost Recovery) Bill 2018 [Provisions], op. cit., p. 31.

[42].              Senate Education and Employment Legislation Committee, Higher Education Support (Charges) Bill 2018 [Provisions], Higher Education Support Amendment (Cost Recovery) Bill 2018 [Provisions], op. cit., pp. 33–36.

[43].              Universities Australia, More detail needed on student loans scheme tax, media release, 21 September 2018.

[44].              Group of Eight (Go8), Submission to the Senate Education and Employment References Committee, Inquiry into the Higher Education Support (Charges) Bill 2018 [Provisions], Higher Education Support Amendment (Cost Recovery) Bill 2018 [Provisions], November 2018, p. 1.

[45].              Innovative Research Universities (IRU), ‘Government should bear the cost of student service: IRU opposes “cost recovery” for HELP operational costs’, policy statement, IRU website, 2 November 2018.

[46].              The Council of Australian Postgraduate Associations (CAPA), What does the 2018/19 Federal Budget mean for students? Briefing for CAPA affiliates, Briefing paper, 9 May 2018, p. 4.

[47].              CAPA, Attacks on Australia’s renowned student loans system must stop, says CAPA, media release, 4 July 2019.

[48].              Australian Council for Private Education and Training (ACPET), Tertiary education budget policies offer more disappointment or wrong direction, media release, 10 May 2018.

[49].              Council of Private Higher Education, Submission to the Senate Education and Employment References Committee, Inquiry into the Higher Education Support (Charges) Bill 2018 [Provisions], Higher Education Support Amendment (Cost Recovery) Bill 2018 [Provisions], November 2018, p. 1.

[50].              Grattan Institute, Submission to the Senate Education and Employment References Committee, Inquiry into the Higher Education Support (Charges) Bill 2018 [Provisions], Higher Education Support Amendment (Cost Recovery) Bill 2018 [Provisions], November 2018, p. 2.

[51].              Ibid., p. 3.

[52].              Explanatory Memorandum, Higher Education Support Amendment (Cost Recovery) Bill 2019, p. 2.

[53].              Explanatory Memorandum, Higher Education Support Amendment (Cost Recovery) Bill 2018, p. 2.

[54].              Explanatory Memorandum, Higher Education Support (Charges) Bill 2019, p. 2.

[55].              Australian Government, ‘Part 1: revenue measures’, Budget measures: budget paper no. 2: 2019–20, 2 April 2019, p. 7.

[56].              The Statements of Compatibility with Human Rights can be found at page 4 of the Explanatory Memorandum to the Cost Recovery Bill and page 3 of the Explanatory Memorandum to the Charges Bill.

[57].              Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 11, 17 October 2018, p. 72.

[58].              The Tertiary Education Quality and Standards Agency (TEQSA) lists 170 registered higher education providers while the Australian Government’s StudyAssist website lists 147 providers approved to offer Commonwealth assistance through HELP, suggesting there are approximately 23 registered higher education providers in Australia that are not FEE-HELP providers. See Tertiary Education Quality and Standards Agency (TEQSA), ‘Search the National Register’, TEQSA website, 2018; Australian Government, ‘Providers that offer Commonwealth assistance’, StudyAssist website.

[59].              Explanatory Memorandum, Higher Education Support (Charges) Bill 2019, p. 2.

[60].              Ibid., p. 5.

[61].              DET, Cost Recovery Implementation Statement: cost recovery activities for the HECS-HELP and FEE-HELP programs financial year 2018–19, op. cit., p. 9.

[62].              Ibid., pp. 12–14.

[63].              Ibid., p. 15.

[64].              Some of the largest NUHEPs, such as UTS Insearch are themselves controlled entities of universities. Parliamentary Library calculations based on DoE, ‘2017 Section 13 – Private Universities (Table C) and Non-University Higher Education Institutions: Table 13.2: All Students by State, Private University (Table C)(a) and Non-University Higher Education Institution and Broad Level of Course, Full Year 2017’, Private Universities (Table C) and Non-University Higher Education Institution tables for the 2017 full year, DoE website, 14 September 2018; DET, Cost Recovery Implementation Statement: cost recovery activities for the HECS-HELP and FEE-HELP programs financial year 2018–19, op. cit., p. 14.

[65].              Indexed student contribution amounts for 2019 are available at DoE, ‘2019 Student contribution bands and ranges’, StudyAssist website.

[66].              Explanatory Memorandum, Higher Education Support Amendment (Cost Recovery) Bill 2019, p. 2.

[67].              DET, Cost Recovery Implementation Statement: cost recovery activities for the HECS-HELP and FEE-HELP programs financial year 2018–19, op. cit., pp. 11–13.

[68].              DoF, Australian Government cost recovery guidelines, op. cit., p. 14.