This chapter will summarise the key issues raised during the inquiry, including:
the proposed tuition protection arrangements and the fact that they do not extend to domestic students who have paid their tuition fees upfront;
the potential burden the arrangements may place on Technical and Further Education institutions (TAFEs); and
the need for greater transparency in relation to the levies and for broader consultation.
The chapter will conclude by outlining the committee view and recommendation.
Students paying fees upfront
Submitters were broadly supportive of the bills and the proposed expansion of the Tuition Protection Service (TPS). For example, Charles Sturt University stated:
Taken together, the intent of the reforms intend by the Bills will strengthen post-secondary study options for Australian students, and in particular Australians living in our regional cities, rural towns and remote communities.
Charles Sturt University commends the purpose of the [bills] to implement a new tuition protection model for students accessing VET Student Loans, FEE-HELP or HECS-HELP at a private education provider or TAFE.
At the hearing Mr Simon Finn, Chief Executive Officer of Independent Higher Education Australia (IHEA) stated:
The impetus for supporting the extension of the TPS is reflected in how extremely well managed the international TPS scheme is. …
It's a successful scheme that has placed students when it can and refunded students when it can't place them. So it has successfully managed that.
What we've also seen over the years is their premiums consistently coming down. So it's the strength of that managed central system.
While advocating for the expansion of the TPS, some inquiry participants expressed concern that domestic students who pay their tuition fees upfront would be excluded from the scheme. They argued that such an exclusion could result in the following:
Upfront fee paying students will not be provided the same level of tuition protection as students who access a government loan and will thereby be discriminated against.
It will increase the administrative burden and red-tape on providers.
It will increase insurance premiums for providers who would likely pass on these costs to students through increased fees.
Submitters contended that the tuition protection arrangements should be extended to cover all students in the vocational education and training (VET) and higher education sectors, and that the arrangements should not discriminate against students who do not access a government loan for their tuition. As explained by Independent Tertiary Education Council Australia (ITECA):
This will therefore establish an arrangement where different students in the same educational program, the same class with different circumstances could have vastly differing outcomes in the event the tuition protection mechanism is called to action:
An overseas student could be fully refunded or placed in a replacement course;
A domestic HELP / VSL student could be assisted to resume their studies receive a recredit of their loan balance;
A domestic fee-paying student whose family has saved hard to pay for them to do their course in a critical area of need would be left with no safety net.
The view of ITECA is that this creates a distorted undesirable, unreasonable and inequitable mechanism for protecting students: the arrangements are picking which students to protect based on an apparent assessment of the ability to pay.
The Tertiary Education Quality and Standards Agency (TEQSA) similarly considered that there was scope to extend the proposed tuition protection arrangements 'beyond students that have taken out a HELP loan as a means of ensuring the same levels of strengthened protection for all higher education students'. TEQSA suggested that a potential option to achieve greater coverage for students could involve the introduction of a compensation mechanism, similar to that under the TPS scheme.
IHEA acknowledged 'the likely burden of assessing the large number of independent VET providers required to achieve universal coverage' by 1 January 2020. However IHEA noted that implementing universal coverage for the higher education sector would not be difficult. IHEA explained:
Comparatively, the Independent Higher Education sector is relatively small with 131 providers. Of these only 16 are not currently FEE-HELP approved or CRICOS registered. Implementation of universal TPS protections for independent higher education sector students would be relatively simple to implement, low risk and sector funded.
IHEA advised that expanding the TPS to upfront fee paying students in the higher education sector would provide protection to an additional 15 800 currently enrolled students. IHEA claimed that the extension of the proposed arrangements to these students would 'increase administrative fees and premium revenue to the benefit of the TPS' and:
Will not create [a] significant administrative burden [for] the Commonwealth or providers
Will significantly increase levy revenue to the TPS
Is low risk for the Commonwealth.
In relation to the amount of tuition fees that students pay, Mr Troy Williams, Chief Executive Officer of ITECA noted that a student in the VET sector would usually pay in the range of $1700 to $3500 per semester. Mr Finn advised that students in the higher education sector with a full time load in a 'general degree course' would pay approximately $10 000 per year.
A number of submitters, such as Alphacrucis College, argued that the proposed arrangements would impose an administrative burden on providers:
As an institution it creates a greater administrative burden as we are required to have different arrangements in place for different students. We are also required to report these tuition protection arrangements to two regulators for different students. Any extra costs associated with maintaining and covering the costs of multiple tuition protection arrangements ultimately puts upward pressure on student fees.
Providers also raised concerns relating to rising insurance costs and the increasing reluctance of private insurance companies to provide cover. The Governance Institute of Australia noted that insurance premiums from 2018 increased by 64 per cent in 2019. It argued that the increased insurance costs would place pressure on student tuition fees.
Moreover, IHEA explained that since 2018 there has been one Australian Student Tuition Scheme (ASTAS) approved by TEQSA. ASTAS is currently provided by ITECA, which offers tuition protection for upfront fee paying students in the higher education and VET sectors. ITECA confirmed that as of 2020, it would be discontinuing ASTAS, 'thus removing the main tuition protection scheme for full-paying domestic students'.
In relation to concerns that domestic upfront fee paying students would not be covered under the proposed arrangements, the Department of Employment, Skills, Small and Family Business (Department of Employment) explained that students who choose to pay their fees upfront have entered into a commercial arrangement with their provider and are able to seek a refund of tuition fees by contacting the Australian Competition and Consumer Commission (ACCC):
This does not mean that students who pay for their education or training upfront are not protected. Full fee-paying students are able to access remedies outside of the new tuition protection arrangements, in the event that their provider stops delivering their course or closes.
All students are able to access remedies under Australian Consumer Law, and full fee-paying students can contact the Australian Competition and Consumer Commission to seek a refund of their upfront fees from a provider that has closed.
The Department of Education similarly acknowledged the concerns and advised that current protections would continue for higher education students:
The department acknowledges concerns raised about tuition assurance arrangements for domestic higher education students who are not assisted by income contingent loan programs and notes that these arrangements remain unchanged. These students will continue to be protected under the Higher Education Standards Framework (Threshold Standards) 2015, administered by the Tertiary Education Quality and Standards Agency (TEQSA).
At the hearing, Ms Nadine Williams, Deputy Secretary of the Department of Employment outlined the rationale for the proposed arrangements:
The first is that, if you incur a government debt, it's important that there be protections in place should something go wrong in that situation, and this scheme covers that side of things. If you are paying significant upfront fees, there are existing protections in the system that are required under the standards and are regulated by ASQA and that mean that providers have to put in place guarantees and other things that mean that, if those providers fold or the courses are closed, those students are protected.
Mr George Thievos from the Department of Employment addressed concerns related to the perceived additional administrative burden that the arrangements would place on providers. He advised there would be a continuation of arrangements that have been in place since 2009, and therefore providers should not have to sort students into different arrangements.
On the matter of ASTAS ceasing operations in 2020 and the rising cost of insurance premiums, the Department of Employment outlined that VET providers who charge upfront fees of $1500 or more are already required to have tuition protection for students, which may include one of three options:
Being a member of ASTAS;
Holding an unconditional bank guarantee for the amount of prepaid fees for each student; or
Electing not to collect upfront fees of $1500 or more.
Ms Williams confirmed that when ASTAS ceases to provide tuition assurance, providers will still have two other avenues to provide tuition assurance. Additionally, Mr Thievos noted that there are currently more than 4000 registered training organisations (RTOs) in the VET sector, of which, only 120 are members of ASTAS. Mr Thievos stated that both the Department of Employment and ASQA would nevertheless be monitoring events closely.
Potential burden on TAFEs
A number of submitters argued that, with respect to the VET sector, TAFEs would be subsidising for-profit private providers. The Australian Education Union (AEU) noted that there has been a significant decline in the number of TAFE providers in the VET sector, as well as a decreasing proportion of public funding provided to TAFEs. The AEU argued that the VET sector had suffered reputational damaged due to the actions of private, for-profit RTOs. The AEU stated:
The AEU agrees that students taking out loans to undertake vocational education should be protected and assisted in the case of provider or course closure, but TAFEs should not be punished for the failures of the mass privatisation of vocational education in Australia nor for the lack of quality and rigor of some private RTOs.
Both the AEU and TAFE Directors Australia (TDA) ultimately recommended that TAFEs not be subject to the administrative fee component of the levy.
TDA explained that while the Secretary is responsible for approving providers under the VSL Act, as well as issuing the loan for each student, the replacement provider is responsible for accepting students from failed providers. The TDA posited that good providers may be carrying the risk of poor decisions or poor oversight by the Secretary. Mr Craig Robertson, Chief Executive Officer of TDA reiterated this concern at the hearing:
The point we make in our submission is that the secretary of the department of employment, the responsible department now, carries full responsibility, full accountability, for the approval of a provider and, indeed, approval of individual loans. The point we make in our submission is that they can make those decisions, yet TAFEs primarily will have to pick up the pieces when a provider closes or a course closes. It's our very strong view that, as a result, TAFE should be excluded from the tuition protection scheme arrangements, because, after all, they are publicly established entities. A state or territory is not going to recklessly close down a course or close down a TAFE in that way.
Mr Robertson elaborated on the financial costs to TAFEs:
I am looking at VET student loans primarily. At the moment, there are about 54 000 students enrolled in VET student loans and about 14 000 of those are with non-TAFE providers. As I said before, we're paying
$670 000 in fees to prop up a scheme to support essentially 14 000 students. That seems a tad excessive from our viewpoint. That money could be redirected to training.
Mr Ronald Jackson, Director at TDA argued that publicly funded TAFEs are effectively guaranteed by state governments and reiterated the financial burden the proposed levy would place on TAFEs:
Table A providers are exempt from the new provisions as public institutions—the department's acknowledged that. But, under the proposed new arrangements, TAFEs won't be, and yet the new arrangements only cover VET student loans…We're talking about a scheme that's going to be extended to cover just under 14 000 students. It's going to cost TAFEs around $670 000 a year just in administration for a scheme to cover 14 000 students, in effect, because the balance of students is guaranteed by the state governments, as Mr Robinson has said. It is our view that, if you actually look at the data the argument for TAFEs to be involved in the scheme or for the scheme to operate as it is, you've got to wonder whether the economics are there. As an alternative, if you want to cover 14 000 students for $670 000, you could probably get a much cheaper product in the marketplace just through insurance.
TDA also raised concerns that TAFEs will likely be placed under a greater burden due to the poor quality of training provided by private VET providers. TDA explained:
When a provider takes on a student from another provider it also takes on the record of prior training. Increased regulatory scrutiny and compliance requirements in meeting training package requirements per student means that TAFEs carries the risk of poor training practices of the original provider. There are still too many instances of poor provider practice. TAFEs risk being penalised by the regulator for the poor practice of the closing providers in being forced to take on their students.
To remedy this issue, TDA suggested that ASQA be required to guarantee the records of the transferring student and, where there is evidence of poor training practices, TAFEs should be allowed to reject a displaced student or require the student to start the course afresh.
However, the Department of Employment explained that the bills already recognise that TAFEs present a lower risk as they would be exempt from paying the risk rated premium and the special tuition protection components. Ms Williams explained:
Finally there have been some questions about why TAFEs have been included in this scheme. The department acknowledges that TAFEs have a very different risk profile than other providers, and this is reflected in the reduced levy arrangements that are being proposed. However, we do also note that 61 per cent of students that incur a government loan study in the TAFE system. Without the protections put forward in these bills, these students will have no recourse should their course be cancelled…These students would be fully reliant on the goodwill of the TAFEs or the state or territory governments to place them in another course—or, more importantly, to ensure that their loan is refunded. If TAFEs are not included in these measures these students will have no guarantee that this will occur. The new arrangements will help build a stronger and more sustainable VET sector, of which TAFEs are a critical part. They will provide an aligned, equitable and national approach and ensure that all providers in the system share the costs and benefits of having strong tuition protections in place for all students.
In relation to claims that TAFE students would be protected by state governments, Mr Thiveos confirmed that the VSL loan would not be protected by the relevant state government as the loan is a liability to the Commonwealth.
Ms Karen Sandercock, Group Manager from the Department of Education reiterated that:
Essentially, it comes down a decision of government around continuation of existing assurance arrangements that have operated to this point, and recognising the fundamental nature of their continuation, rather than dramatically changing them in terms of the higher education sector.
In relation to the obligations of the replacement provider, the Department of Employment clarified that 'providers would not be obliged to take on displaced students, although they are encouraged to do so'. The Department of Employment elaborated that the proposed civil penalties do not relate to whether a second provider refuses to accept a displaced student:
Providers who do elect to take on these student would be supported by a new incentive payment, where required. The incentive payment would cover a portion of the administrative costs a replacement provider might incur in placing the student.
While providers are encouraged to enrol displaced students, and support and train them to gain their qualification, there is no requirement to do so, and the Bills do not impose any penalties or other punitive measures if a provider does not offer displaced students a place in a replacement course.
While the Bills do include provisions that would allow the imposition of civil penalties, there is no penalty should a second provider refuse to offer a displaced student a place in a replacement course.
Transparency of costs to providers and the need for more broad consultation
A number of submitters sought further information concerning the potential additional costs to providers. ITECA stated:
Given the additional costs to be imposed on business through these policies, ITECA strongly urges the Committee to consider to ensure transparency with respect to the measures currently before it in an effort to enable businesses to plan and forecast appropriately.
IHEA contended that its cost modelling indicated that the tuition protection arrangements will generally reduce costs for providers and subsequently relieve pressure on student fees, but that 'this may not be the case for all providers'.
ITECA argued that consultation with independent providers would be essential to ensure the success of the arrangements:
Consultation and industry engagement on these aspects of the framework – that directly affect independent providers – is essential to the model of those businesses and was a feature in the design of the TPS on which these domestic measures are predicated.
At the hearing, Mr Robertson also noted that the TPS Advisory Board did not include a member from the VET sector, which he considered to be a risk to the TPS scheme:
But at the moment if you look at the members on the tuition protection scheme board they are all fine upstanding people, but essentially they don't know what they don't know. Remember that everybody said that VET FEE-HELP was going swimmingly. Everybody was all okay with it until there were closures. So I really do think you need that on the ground intelligence on that committee to be able to give a good risk rating and look at mitigation strategies that would really limit the risk on the TPS scheme and fund.
The National Union of Students (NUS) argued that despite TAFEs beginning to offer degrees, there was presently little opportunity for TAFEs to influence higher education policy. Mr Lachlan Barker of the NUS stated:
VET providers must be included in higher education strategy and policy, and legislation must tackle the funding gaps and recruitment issues experienced by our formerly world-class vocational providers.
Two additional discrete concerns were raised in relation to the lack of information provided about the levies, including:
the 'risk factors' to determine the risk rated premium component; and
the 'target fund size' in relation to the special tuition protection component.
As outlined in chapter 2, the risk rated premium component is calculated on the basis of the provider's level of exposure, as well as the provider's risk of default based on certain 'risk factors'. ITECA noted that the risk factors that inform the risk rated premium component will be outlined in a legislative instrument. ITECA expressed the view that 'consultation on the risk factors is essential as soon as possible and before these instruments are made'.
With regard to the 'target fund size', chapter 2 outlines that the special tuition protection component may be imposed in instances where the levy funds are below the 'target fund size'. The NUS raised concerns in relation to the ambiguity of the target fund size:
…there is no indication of what this target is, or projections for what it might be. NUS is concerned by the absence of details about this potential increase in the levy: where private providers are required to pay additional fees, they have indicated that this will translate into further costs for students.
The NUS sought further clarity around the special tuition protection component and specifically, the projected amount for the target fund size.
Inquiry participants were overwhelmingly supportive of the bills' proposal to expand the TPS for international students to domestic students. In fact, during the inquiry the committee did not receive any evidence to the effect that the TPS should not be extended to domestic students. As stated by Assistant Minister Irons:
It makes sense to expand the TPS model to domestic students accessing government loans. Since its inception in 2012, the TPS has proven to be successful for students and providers and contributes to the strong reputation of Australia's international education sector.
The committee acknowledges the concerns raised by submitters that domestic students who pay upfront fees will not be included in the proposed tuition protection arrangements. The committee is also mindful of the advice from ITECA that ASTAS will cease to operate from 2020.
However, the committee notes the advice from the Department of Employment that there are existing arrangements in the system that protect upfront fee paying students. This includes minimum standards administered by TEQSA for higher education providers and ASQA for VET providers. Furthermore, domestic students who do not access a government loan will continue to be protected under consumer law and may seek the assistance of the ACCC.
In relation to concerns that ASTAS will no longer provide tuition protection assurance as of 1 January 2020, the committee heard that ASTAS is currently one of three possible avenues open to providers to afford tuition protection to its students who pay upfront fees. As such, two options will continue to be available to providers. Moreover, the Department of Employment confirmed that of the 4000 RTOs in the VET sector, only 120 of these RTOs are members of ASTAS. Regardless, the Department of Employment confirmed that the situation will be closely monitored by both ASQA and the department. The committee is therefore satisfied that sufficient safeguards are in place for domestic upfront fee paying students, should their course not be provided as forecast.
In relation to concerns that an additional burden will be placed on TAFEs, the committee notes that the proposed arrangements already take into consideration that TAFEs have a lower risk profile than other providers. Accordingly, TAFEs will not be required to pay the risk rated premium and the special tuition protection components. The Department of Employment advised that approximately 60 per cent of students that incur a government loan study in TAFEs. The committee is of the view that a national approach to tuition protection is essential. Given the significant number of students in TAFEs accessing government tuition loans, the participation of TAFEs in the proposed tuition protection arrangements is crucial.
The committee acknowledges the views expressed by some submitters that as much information as possible needs to be provided about the costs to providers. Additionally, the committee agrees that it is important to engage with all sectors in relation to the proposed arrangements going forward.
The committee reiterates its support for the introduction of a national tuition protection system, modelled on the successful TPS arrangements.
The committee recommends that the bills be passed.
Senator the Hon James McGrath