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Education and Employment Legislation Committee—Senate Standing—Education Legislation Amendment (Tuition Protection and Other Measures) Bill 2019 [Provisions], the VET Student Loans (VSL Tuition Protection Levy) Bill 2019 [Provisions], Higher Education Support (HELP Tuition Protection Levy) Bill 2019 [Provisions]—Report, dated November 2019


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November 2019

The Senate

Education and Employment Legislation Committee

Education Legislation Amendment (Tuition Protection and Other Measures) Bill 2019 [Provisions]

VET Student Loans (VSL Tuition Protection Levy) Bill 2019 [Provisions]

Higher Education Support (HELP Tuition Protection Levy) Bill 2019 [Provisions]

© Commonwealth of Australia 2019

ISBN 978-1-76093-019-6

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License.

The details of this licence are available on the Creative Commons website: http://creativecommons.org/licenses/by-nc-nd/3.0/au/.

Printed by the Senate Printing Unit, Parliament House, Canberra

iii

Members

Chair Senator the Hon James McGrath LP, QLD

Deputy Chair Senator Louise Pratt ALP, WA

Members Senator Perin Davey Nats, NSW

Senator Mehreen Faruqi AG, NSW

Senator Deborah O'Neill ALP, NSW

Senator Matt O'Sullivan LP, WA

Secretariat Dr Jane Thomson, Committee Secretary Ms Pothida Youhorn, Principal Research Officer Ms Kate Campbell, Senior Research Officer Ms Leonie Lam, Research Officer Ms Jade Monaghan, Administrative Officer

Committee web page: www.aph.gov.au/senate_eec

PO Box 6100 E-mail: eec.sen@aph.gov.au

Parliament House Ph: 02 6277 3521

Canberra ACT 2600 Fax: 02 6277 5706

v

Table of Contents

Members ............................................................................................................................................. iii

Chapter 1—Introduction .................................................................................................................... 1

Conduct of the inquiry ........................................................................................................................ 1

Compatibility with human rights ...................................................................................................... 1

Financial impact statement ................................................................................................................. 2

Acknowledgments ............................................................................................................................... 2

Notes on references .............................................................................................................................. 2

Chapter 2—Overview ......................................................................................................................... 3

Purpose of the bills .............................................................................................................................. 3

Current tuition assurance arrangements for domestic students ................................................... 3

Tuition protection for the vocational education and training sector ................................. 4

Tuition protection for the higher education sector .............................................................. 5

Tuition protection model for international students ...................................................................... 5

Overview of the bills............................................................................................................................ 7

Provisions of the Tuition Protection Bill ........................................................................................... 7

Which providers are covered by the new tuition protection arrangements?................... 7

Key roles ..................................................................................................................................... 8

Establishment of Tuition Protection Funds ........................................................................... 9

What are the tuition protection requirements? .................................................................. 10

Requirement to inform the relevant director and student of the default ....................... 10

Definition of 'default' .............................................................................................................. 11

Suitable replacement course .................................................................................................. 11

Obligations of replacement provider ................................................................................... 12

Re-crediting students fees ...................................................................................................... 13

Transitional provisions .......................................................................................................... 13

Review of the Tuition Protection Service and the new scheme ....................................... 14

Schedule 3 - arrangements for revoking VSL provider status ......................................... 14

Provisions of the VSL Levy Bill and the HELP Levy Bill ............................................................. 14

Administrative fee component ............................................................................................. 16

Risk rated premium component ........................................................................................... 16

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Special tuition protection component .................................................................................. 17

Senate Committee for the Scrutiny of Bills ..................................................................................... 18

Significant matters in delegated legislation ........................................................................ 18

Broad discretionary power .................................................................................................... 20

Broad delegation of administrative powers ........................................................................ 21

Charges in delegated legislation ........................................................................................... 23

Chapter 3—Key issues...................................................................................................................... 25

Students paying fees upfront ........................................................................................................... 25

Potential burden on TAFEs .............................................................................................................. 30

Transparency of costs to providers and the need for more broad consultation ....................... 33

Committee view ................................................................................................................................. 35

Labor Senators' Additional Comments ......................................................................................... 37

Australian Greens Senators' Additional Comments .................................................................. 41

Appendix 1—Submissions and additional information ........................................................... 45

Appendix 2—Public hearing and witnesses ................................................................................ 47

1

Chapter 1 Introduction

1.1 On 17 October 2019 the Senate referred the provisions of the following bills to the Senate Education and Employment Legislation Committee (the committee) for inquiry and report by 22 November 2019:

 Education Legislation Amendment (Tuition Protection and Other Measures) Bill 2019 (Tuition Protection Bill)  VET Student Loans (VSL Tuition Protection Levy) Bill 2019 (VSL Levy Bill)  Higher Education Support (HELP Tuition Protection Levy) Bill 2019

(HELP Levy Bill).1

1.2 In accordance with the recommendation of the Senate Selection of Bills Committee, the committee considered the three bills concurrently.2

Conduct of the inquiry 1.3 Details of the inquiry were made available on the committee's website. The committee also contacted a number of organisations and individuals inviting submissions to the inquiry. Submissions were received from 20 organisations,

as detailed at Appendix 1.

1.4 The committee held one public hearing in Canberra on 12 November 2019. The witness list for the hearing can be found at Appendix 2.

Compatibility with human rights 1.5 The statement of compatibility with human rights for the Tuition Protection Bill indicates that this bill engages the following human rights:

 the right to education in article 13 of the International Covenant on Economic, Social and Cultural Rights (ICESCR);  the right to privacy in article 17 of the International Covenant on Civil and Political Rights (ICCPR);  the right to a fair and public hearing in article 14 of the ICCPR; and  the right to be presumed innocent in Article 14 of the ICCPR.3

1.6 The statement of compatibility with human rights for the Tuition Protection Bill concluded that the bill is compatible with human rights because 'to the

1 Journals of the Senate No. 23, 17 October 2019, pp. 704-706.

2 Senate Selection of Bills Committee, Report No. 7 of 2019, Appendix 1, pp. 5-6.

3 Education Legislation Amendment (Tuition Protection and Other Measures) Bill 2019, Explanatory

Memorandum (Tuition Protection Bill, EM), pp. 5-9.

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extent that it may limit human rights, the limitations are reasonable, necessary and proportionate'.4

1.7 The statements of compatibility with human rights for the VSL Levy Bill and the HELP Levy Bill state that both bills are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. The statements noted that this was because neither bill in itself raised any human rights issues. 5

1.8 At the time of writing the Parliamentary Joint Committee on Human Rights had not reported on the bills.

Financial impact statement 1.9 Each of the bills' explanatory memoranda states that based on the projected revenue collected through the levy system, the measure is expected to generate $3 million over the forward estimates.6

Acknowledgments 1.10 The committee thanks those individuals and organisations who contributed to the inquiry by preparing written submissions and giving evidence at public hearings.

Notes on references 1.11 References in this report to the Committee Hansard are to the proof Hansard. Page numbers may vary between the proof and official transcripts.

4 Tuition Protection Bill, EM p. 9.

5 VSL Levy Bill, EM p. 3; HELP Levy Bill, EM, p. 3.

6 Tuition Protection Bill, EM, p. 3; VSL Levy Bill, EM, p. 2; Help Levy Bill, EM p. 2.

3

Chapter 2 Overview

Purpose of the bills 2.1 In his second reading speech, the Assistant Minister for Vocational Education, Training and Apprenticeships, the Hon Steve Irons MP, noted that the package of bills is intended to expand the Tuition Protection Service model for

international students, to domestic students.1 Collectively, the three bills would provide tuition protection for domestic students accessing a VET Student Loan (VSL), a FEE-HELP loan, or a HECS-HELP loan with a private education provider, or TAFE.2 Assistant Minister Irons explained the purpose of the bills, noting that the new tuition protection arrangements would commence from 1 January 2020:

These tuition protections will ensure that students are supported if their education or training provider stops teaching or closes entirely. Students protected under these new arrangements will be assisted to complete their studies in a similar course with another provider and gain a qualification, or may have their loan removed for the parts of their study they have commenced but were not able to complete.

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.3

Current tuition assurance arrangements for domestic students 2.2 The tuition protection arrangements for domestic students in the vocational education and training (VET) sector are provided for in the VET Student Loans Act 2016 (VSL Act), with many of the detailed requirements set out in the VET

Student Loans Rules 2016 (the Rules).

2.3 The Department of Employment, Skills, Small and Family Business (Department of Employment), has policy oversight of the VET sector, while the Australian Skills Quality Authority (ASQA) is the national regulator for this sector.

1 The Hon Steve Irons MP, Assistance Minister for Vocational Education, Training and

Apprenticeships, House of Representatives Hansard, 18 September 2019, pp. 3362-3363.

2 The Hon Steve Irons MP, Assistance Minister for Vocational Education, Training and

Apprenticeships, House of Representatives Hansard, 18 September 2019, pp. 3362-3363.

3 The Hon Steve Irons MP, Assistance Minister for Vocational Education, Training and

Apprenticeships, House of Representatives Hansard, 18 September 2019, p. 3363.

4

2.4 The tuition protection arrangements for domestic students undertaking one or more units of study with a higher education provider are outlined in the Higher Education Support Act 2003 (HESA).

2.5 The Department of Education has policy oversight of the international and higher education sectors, while the Tertiary Education Quality and Standards Agency (TEQSA) is the national regulator for the higher education sector.

Tuition protection for the vocational education and training sector 2.6 The VSL Act was passed in December 2016 and replaced VET FEE-HELP with VSL from 1 January 2017. Prior to 2018, tuition assurance was provided by one of two tuition assurance operators:

 the Australian Council for Private Education and Training (ACPET), or  TAFE Directors Australia (TDA).

2.7 The transitional approval for ACPET and TDA as Tuition Assurance Operators expired on 31 December 2017.4 From 1 January 2018, interim tuition assurance arrangements were put in place, which were managed by the then Department of Education and Training.5 In May 2019, the management of the interim arrangements for the VET sector was transferred to the Department of Employment.6 Of note, these arrangements only apply to students with a VSL or VET FEE-HELP loan.

2.8 The Secretary may approve a body to be a course provider under the VSL Act if the Secretary is satisfied that the body meets the course provider requirements.7 The Secretary can exempt a provider from these requirements.8

2.9 Tuition protection is available to VSL and VET FEE-HELP loan students, in the event that their provider closes or stops delivering their course. In these cases, the VSL Act requires the course provider to find a replacement course for the affected student.9 If it is impractical for the student to finish an equivalent course, the course provider is required to repay the balance of the student's

4 https://docs.education.gov.au/system/files/doc/other/20190329_second_provider_factsheet

_and_faqs_ v2.1_final_cleared_clean.pdf (accessed 31 October 2019).

5 Australian Government, Tuition assurance: Assisting displaced VET FEE-HELP and VET Student Loans

students - Replacement provider requirements and information, p. 1, https://docs.employment.gov.au/ system/files/doc/other/tuition_assurance_replacement_provider_requirements_and_information_0 .pdf (accessed 31 October 2019).

6 Australian Government, Tuition assurance: Assisting displaced VET FEE-HELP and VET Student Loans

students - Replacement provider requirements and information, p. 1, https://docs.employment.gov.au/ system/files/doc/other/tuition_assurance_replacement_provider_requirements_and_information_0 .pdf (accessed 31 October 2019).

7 Section 25 of the Vet Student Loans Act 2016 (VSL Act).

8 Section 25(3)(a) of the VSL Act.

9 Section 41 of the VSL Act.

5

fees.10 This would require the course provider to re-credit the student's FEE-HELP balance for an amount equivalent to the tuition fees required for the course.11

Tuition protection for the higher education sector 2.10 Currently, the minister can approve a body corporate as a higher education provider under HESA if it can provide at least one accredited course of study that leads to a higher education award and fulfils the tuition assurance

requirements or is exempt from those requirements.12

2.11 Table A lists the providers that have been exempt from the tuition assurance requirements, which are primarily public universities. 13 Other providers may also be exempt from the tuition requirements with written approval from the minister.14

2.12 The tuition assurance requirements are set out in chapter 2 of the Higher Education Provider Guidelines 2012 (the Guidelines). A non-exempt higher education provider that does not adhere to the tuition assurance requirements may be subject to a civil penalty of 60 penalty units.15

2.13 Students who are enrolled in a course of study which the provider ceases to provide as planned can choose between:

 an offer of a place in a similar course of study with a second provider, without any requirement to pay the second provider; or  a refund of the student's up-front payments for any unit of study that the student commenced but did not complete. If a student chooses this option, a

corresponding reduction will be made of their HECS-HELP debt or their FEE-HELP balance will be re-credited.16

2.14 It should be noted that these arrangements allow students of higher education providers to choose between replacement courses or a refund of course fees. In contrast, the tuition protection arrangements for VSL students give priority to replacement courses, with course fees being refunded only if a suitable replacement course is not available.

Tuition protection model for international students

10 Sections 41 and 69 of the VSL Act.

11 Section 69 of the VSL Act.

12 Section 16-25 of the Higher Education Support Act 2003 (HESA).

13 Section 16-15 of HESA.

14 Section 16-31 of HESA.

15 Section 19-40 of HESA.

16 Chapter 2, 2.20.15 of the Higher Education Provider Guidelines 2012.

6

2.15 The Tuition Protection Service (TPS) was established on 1 July 2012.17

2.16 In its submission, the TPS advised that it acts as a 'placement and refund service of last resort' for the international education sector.18 It explained the scope of its jurisdiction:

The TPS is a universal scheme, hence, all Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) registered education providers are covered by the TPS and contribute to the TPS Levy. However public providers (Table A universities, TAFEs, schools that receive recurrent public funding) are exempt from paying the Risk Rated Premium component of the TPS Levy.

2.17 The TPS is industry funded. All providers of education to international students are required to pay an annual levy. The TPS levy is used to assist students where a provider defaults and is not able to meet their obligations, as well as to contribute to the operational costs of the TPS.19

2.18 The organisational structure of the TPS is as follows:

 TPS Director - is responsible for overseeing the operation of the TPS, including ensuring tuition protection for overseas students, managing the long term sustainability of the Overseas Student Tuition Fund and determining the amount of the annual TPS Levy.

 TPS Advisory Board - is responsible for advising the TPS Director on the settings for the Risk Rated Premium and Special Tuition Protection components of the TPS Levy. The Risk Rated Premium component of the levy is set annually by the TPS Director, on approval by the Treasurer, by 31 December each year, and is set by legislative instrument. The TPS Advisory Board is currently made up of 10 members—five from an Australian government agency and five other members.

 TPS Operations team - provides policy and administrative support to the TPS Director, secretariat support for the TPS Advisory Board and undertakes the TPS Levy collection. The TPS Operations team is provided by the Department of Education.

 TPS Administrator - assists the TPS Director to manage and assess student claims through the TPS online claims management system. The TPS Administrator is an external service provider.20

2.19 The TPS explained that where a provider defaults (that is, they fail to start a course on the agreed starting date or ceases operating a course before it is completed), the provider must either, place the student with an appropriate

17 Tuition Protection Service (TPS), Submission 3, p. 3.

18 TPS, Submission 3, p. 4.

19 TPS, Submission 3, p. 4.

20 TPS, Submission 3, p. 4. See also the TPS website: https://tps.gov.au/StaticContent/Get/Provider

Governance

7

alternative provider, or refund students their unspent tuition fees, within 14 days of the default.21 Where a provider is not able to meet these obligations, the TPS acts in the place of the provider.22

Overview of the bills 2.20 The Education Legislation Amendment (Tuition Protection and Other Measures) Bill 2019 (Tuition Protection Bill) is the principal bill which would establish the new tuition protection arrangements, modelled on the TPS

scheme for international students.23 The Tuition Protection Bill would repeal all tuition assurance provisions from the VSL Act and HESA.

2.21 The following two bills are complementary to the Tuition Protection Bill and would establish the corresponding levy arrangements:

 VET Student Loans (VSL Tuition Protection Levy) Bill 2019 (VSL Levy Bill)  Higher Education Support (HELP Tuition Protection Levy) Bill 2019 (HELP Levy Bill).

2.22 The provisions of the bills are discussed in detail below.

Provisions of the Tuition Protection Bill 2.23 The Tuition Protection Bill contains three schedules:

 Schedule 1 would amend the VSL Act by repealing provisions related to tuition assurance and replacing them with a new VSL tuition protection scheme. In addition, minor consequential amendments are made to the Education Services for Overseas Students Act 2000 (ESOS Act).  Schedule 2 would amend HESA by similarly repealing provisions related to

tuition assurance and replacing them with a new Higher Education Loan Program (HELP) tuition protection scheme.  Schedule 3 would make minor amendments to the VSL Act concerning the Secretary of the department revoking approval of a VSL provider at the

request of that provider.

2.24 The new tuition protection arrangements would commence on 1 January 2020.24

Which providers are covered by the new tuition protection arrangements? 2.25 The new tuition protection arrangements would apply to all approved course providers under the VSL Act and all approved higher education providers

21 TPS, Submission 3, p. 4.

22 TPS, Submission 3, p. 4.

23 Tuition Protection Bill, Explanatory Memorandum (EM), p. 1.

24 Item 2 of the Tuition Protection Bill.

8

under HESA, other than Table A providers or providers who have been exempt.25

2.26 Subsection 16-15 of HESA lists the Table A providers, which are predominantly Australian public universities.

2.27 Proposed paragraph 66A(1)(b) and 166-5(1)(b) respectively, exempts other providers of a kind prescribed by the Rules and Guidelines from the new tuition protection arrangements. This would allow a class of providers to be exempt from the tuition protection arrangements 'should it become apparent that the risk of another class of providers defaulting is also low and they have adequate processes and procedures in place to provide tuition protection to their students'.26

2.28 In addition, with respect to higher education providers, the minister may also determine, by written notice, that the tuition protection arrangements apply or do not apply to a particular higher education provider.27

Key roles 2.29 The Tuition Protection Bill would appoint a VSL Tuition Protection Director and a HELP Tuition Protection Director. The bill specifies that these positions are to be held by the same person who holds the office of the TPS Director.28

The TPS Director will be required to manage the Tuition Protection arrangements relevant to each specific sector, including:

 managing the placement of students where the course provider has defaulted;  paying amounts out of, or reducing the balance of the respective VSL Tuition Protection Fund or HELP Tuition Protection Fund;  reporting to the minister on the operation and financial status of the

corresponding schemes and funds;  managing each of the funds;  making legislative instruments in relation to the VSL Levy and HELP Levy;

and

25 Schedule 1, item 20, proposed section 66A and schedule 2, item 16, proposed section 166-5(1) of the

Tuition Protection Bill. Note, when referring to a 'course provider', this relates to a course provider for the purposes of the VSL Act, when referring to a 'higher education provider', this relates to a higher education provider for the purposes of HESA, when referring to a 'provider', this refers to both course providers and higher education providers.

26 Tuition Protection Bill EM, pp. 17 and 42.

27 Schedule 2, item 16, proposed subsection 166-5(2) of the Tuition Protection Bill.

28 Schedule 1, item 20, proposed section 66M and schedule 2, item 16, proposed section 167-15 of the

Tuition Protection Bill.

9

 recommending that the Secretary take action against a provider that has defaulted in relation to a student or has not otherwise complied with the Act.29

2.30 A VSL Tuition Protection Fund Advisory Board and a HELP Tuition Protection Fund Advisory Board would be established and comprise the same members as the TPS Advisory Board.30 This would include the Chair and Deputy Chair of the TPS Advisory Board also being the Chairs and Deputy Chairs of the VSL Advisory Board and HELP Advisory Board.31 Like the TPS Advisory Board, the role the VSL and HELP Advisory Boards is to provide advice and make recommendations to the corresponding Director in relation to setting the VSL Levy and HELP Levy.32

Establishment of Tuition Protection Funds 2.31 Two new separate accounts will be established—a VSL Tuition Protection Fund and a HELP Tuition Protection Fund.33 The purpose of each fund relates to its corresponding sector and includes, for example, making payments in

connection with tuition protection, paying the respective director and Advisory Board including costs associated with the performance of these functions, and reducing the balance of the Fund (and therefore the available appropriation for the Fund) without making a real or notional payment.34 The Tuition Protection Bill also provides that the Rules and Guidelines may make provisions concerning the making of payments in connection with tuition protection, including in relation to the following:

 the circumstances in which payments may be made;  the amounts of different kinds of payments;  the methods for calculating different kinds of payments.35

29 Schedule 1, item 20, proposed section 66N and schedule 2, item 16, proposed section 167-20 of the

Tuition Protection Bill.

30 Schedule 1, item 20, proposed section 66Q and schedule 2, item 16, proposed section 167-30 of the

Tuition Protection Bill.

31 Schedule 1, item 20, proposed sections 66Q and schedule 2, item 16, proposed section 167-30 of the

Tuition Protection Bill.

32 Schedule 1, item 20, proposed sections 66R and schedule 2, item 16, proposed section 167-35 of the

Tuition Protection Bill.

33 Schedule 1, item 20, proposed section 66J and schedule 2, item 16, proposed section 167-1 of the

Tuition Protection Bill.

34 Schedule 1, item 20, proposed section 66L, and schedule 2, item 16, proposed section 167-10 of the

Tuition Protection Bill.

35 Schedule 1, item 20, proposed subsection 66L(2), and schedule 2, item 16, proposed subsection

167-10(2) of the Tuition Protection Bill.

10

2.32 Certain credits must be made to the fund, as listed at schedule 1, proposed section 66K and schedule 2, proposed section 167-5. These include amounts relating to the corresponding tuition protection levy, penalties for late payments of the levy, and other amounts related to the fund.

What are the tuition protection requirements? 2.33 Approved providers are required to comply with the new tuition protection arrangements proposed by the Tuition Protection Bill, pay an annual levy as set by the corresponding VSL Levy Bill or HELP Levy Bill, and pay any late

payment penalty.36 The requirements for the tuition protection arrangements are set out in new Parts proposed by the bill and would include:

 Notification obligations to the relevant director and affected student in the event of the provider defaulting; and  Provision of information to the relevant director to enable the director to assist affected students to find a replacement course or have their VSL,

FEE-HELP or HECS-HELP balance re-credited.37

2.34 The Tuition Protection Bill also provides that relevant Rules and Guideline may make provision for a range of matters relating to the relevant tuition protection levy and penalties for late payment,38 as listed in schedule 1, proposed subparagraph 49A(2), and schedule 2, proposed subparagraph 19-66A(3).

Requirement to inform the relevant director and student of the default 2.35 Where a course provider defaults on a student, the course provider must notify the VSL Tuition Protection Director within 24 hours of the default.39 Within 3 business days of the default, the provider must inform the VSL

Tuition Protection Director of specified details relating to the student, the course and the tuition fees.40 If requested in writing by the VSL Tuition Protection Director, the provider must give the director specified documentation relating to the parts of the course that the student has completed.41 The Tuition Protection Bill also provides that the Rules may prescribe requirements relating to these notices.42

36 Schedule 1, item 18, proposed subsection 49A(1) and schedule 2, item 5, proposed section 19-66A

of the Tuition Protection Bill.

37 Schedule 1, item 20, Part 5A, and schedule 2, item 16, Part 5-1A of the Tuition Protection Bill.

38 Schedule 1, item 18, proposed subparagraph 49A(2), and schedule 2, item 5, proposed

subparagraph 19-66A(3) of the Tuition Protection Bill.

39 Schedule 1, item 20, proposed subsection 66C(2) of the Tuition Protection Bill.

40 Schedule 1, item 20, proposed subsection 66C(3) of the Tuition Protection Bill.

41 Schedule 1, item 20, proposed subsection 66C(4) of the Tuition Protection Bill.

42 Schedule 1, item 20, proposed subsection 66C(5) of the Tuition Protection Bill.

11

2.36 Course providers must also notify the affected student of the default within 24 hours of the default, as well as comply with any notice requirements as prescribed by the Rules.43

2.37 A course provider who does not comply with the requirements and fails to notify the VSL Tuition Protection Director or the affected student may be subject to a civil penalty or an offence of strict liability, each of 60 penalty units. 44

2.38 Equivalent provisions apply to higher education providers.45

Definition of 'default' 2.39 A provider is determined to have defaulted in relation to a student under the following circumstances:

 the course or unit of study does not commence as scheduled and the student is still enrolled in the course; or  the course or unit of study, or part thereof, ceases before it is completed and the student is still enrolled in the course.46

2.40 Additionally, in relation to VET course providers, the student must have had a VSL approved or have a HELP balance of greater than zero on that day.47 With regards to higher education providers, the students must have been entitled to FEE-HELP assistance or HECS-HELP assistance for the unit of study.48 One of the eligibility criteria for FEE-HELP and HECS-HELP assistance is that the student must have applied for the assistance.49 The effect of these provisions is that students who have paid their course fees upfront will not be covered by the tuition protection arrangements.

Suitable replacement course 2.41 Where a provider has defaulted, the relevant director must decide whether or not there is a suitable replacement course for the affected student.50 Proposed

43 Schedule 1, item 20, proposed section 66D of the Tuition Protection Bill.

44 Schedule 1, item 20, proposed subsections 66C(6) and (7) and proposed section 66D of the Tuition

Protection Bill.

45 Schedule 2, item 16, proposed sections 166-15 and 166-20 of the Tuition Protection Bill.

46 Schedule 1, item 20, proposed section 66B and schedule 2, item 16, proposed section 166-10 of the

Tuition Protection Bill.

47 Schedule 1, item 20, proposed section 66B of the Tuition Protection Bill.

48 Schedule 2, item 16, proposed section 166-10 of the Tuition Protection Bill.

49 www.studyassist.gov.au/help-loans/fee-help and www.studyassist.gov.au/help-loans/hecs-help

(accessed 30 October 2019).

50 Schedule 1, item 20, proposed subsection 66E(1) and schedule 2, item 16, proposed subsection

166-25(1) of the Tuition Protection Bill.

12

subsection 66E(2) of schedule 1 and proposed subsection 166-25(2) of schedule 2 lists the matters that the director must have regard to when determining whether a course is a suitable replacement course, and includes any other matters prescribed by the Rules and Guidelines.

2.42 The director may require an approved course provider to provide information to inform a decision in relation to whether there is a suitable replacement course.51 Failure to comply with a director's request for information would give rise to a civil penalty and is also recognised as an offence of strict liability of 60 penalty units each.52

2.43 If the director determines that a suitable replacement course is available, the director must inform the student in writing of certain details relating to the course, the new provider, the tuition fees, and information concerning the student's right to request a reconsideration of the director's decision within 28 days of the notice.53

Obligations of replacement provider 2.44 The Tuition Protection Bill imposes a number of obligations on the replacement provider when a provider that has made an offer for a replacement course or unit of study and the student accepts the offer.54 These

obligations include:

 providing written notice of the acceptance to the director within 14 days of the acceptance;  granting the student the course credits completed by the student;  ensuring that tuition fees for the replacement component of the replacement

course are not changed if tuition fees have been paid for the original course; and  enrolling the student in the replacement course as soon as practicable.55

2.45 Approved providers who do not comply with these requirements may be subject to a civil penalty or a strict liability offence of 60 penalty units each.56

51 Schedule 1, item 20, proposed subsection 66F(1) and schedule 2, item 16, proposed subsection

166-27(1) of the Tuition Protection Bill.

52 Schedule 1, item 20, proposed subsections 66F(3) and (4) and schedule 2, item 16, proposed

subsection 166-27(3) and (4) of the Tuition Protection Bill.

53 Schedule 1, item 20, proposed subsection 66E(3) of the Tuition Protection Bill and schedule 2, items

19 and 20 of the Tuition Protection Bill.

54 Schedule 1, item 20, proposed section 66G and schedule 2, item 16, proposed section 166-30 and

proposed subsection 166-32(1) of the Tuition Protection Bill.

55 Schedule 1, item 20, proposed section 66G and schedule 2, item 16, proposed section 166-30 of the

Tuition Protection Bill.

56 Schedule 1, item 20, proposed subsections 66G(4) and (5) and schedule 2, item 16, proposed

subsections 166-30(4) and (5) of the Tuition Protection Bill.

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2.46 Moreover, replacement higher education providers must also keep up to date records in relation to the student concerning the matters listed in proposed subsection 166-32(1) of schedule 2. A failure of the replacement provider to keep these records may be subject to a strict liability offence of 60 penalty units. 57

Re-crediting students fees 2.47 In relation to VSL Act course providers, where there is no suitable replacement course available, the VSL Tuition Protection Director must inform the affected student in writing of the decision, including the matters the director had

regard to and information concerning the student's right to seek a reconsideration of the decision. Where a decision is not reconsidered or is confirmed, the director is required to indicate in writing that an amount equal to the student's loan amount used to pay tuition fees will be re-credited to the student's HELP balance.58

2.48 The VSL Tuition Protection Director must also give written notice to the Secretary and the course provider of the default, including the director's decision that there is no suitable replacement course for the student.59 The notice to the course provider must also state the fee amount to be re-credited to the student's HELP balance, noting that the course provider will be required to pay this amount to the Commonwealth, and inviting the course provider to make a written submission to the director within 28 days about the re-credited amount.60

2.49 With regards to HESA higher education providers, the student's fees are re-credited if the HELP Tuition Protection Director is not satisfied that there is a replacement course, or if the student elects to have the fees re-credited to their HELP balance.61 The amount re-credited is equal to the amount of the FEE-HELP or HECS-HELP assistance that the student received for the affected unit.62 Like the VSL Tuition Protection Director, in the event of the student's HELP balance being re-credited, the HELP Tuition Protection Director must also notify the Secretary and the higher education provider.63

Transitional provisions

57 Schedule 2, item 16, proposed subsection 166-32(3) of the Tuition Protection Bill.

58 Schedule 1, item 20, proposed subsection 66E(4) of the Tuition Protection Bill.

59 Schedule 1, item 20, proposed section 66H of the Tuition Protection Bill.

60 Schedule 1, item 20, proposed subsection 66H(3) of the Tuition Protection Bill.

61 Schedule 2, item 16, proposed section 166-35 of the Tuition Protection Bill.

62 Schedule 2, item 16, proposed subparagraph 166-35(1)(b)(ii) of the Tuition Protection Bill.

63 Schedule 2, item 16, proposed subsections 166-35(2) and (3) of the Tuition Protection Bill.

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2.50 The tuition protection arrangements proposed by the Tuition Protection Bill will not apply to course providers already approved at the time the changes come into effect, or if prior to the commencement of the bill, the course provider had made an application for approval which had not been decided.64

Review of the Tuition Protection Service and the new scheme 2.51 The Tuition Protection Bill would require the minister to commence a concurrent review, before 1 July 2021, of the TPS scheme, the operation of the provisions of the Tuition Protection Bill, and the VSL and HELP funds.65 A

report must be prepared of the review, which the minister must table in both Houses of Parliament within 15 sitting days of the completion of the report.66

Schedule 3 - arrangements for revoking VSL provider status 2.52 Schedule 3 of the Tuition Protection Bill proposes minor amendments to the VSL Act relating to the Secretary revoking the VSL provider's status at the request of the provider. Currently, under section 38 of the VSL Act, an

approved provider can require that the Secretary revoke the provider's approval. Items 2 and 3 of schedule 3 propose to amend section 38 to allow the Secretary to refuse to revoke the approval if the suspension or revocation of an approval is already in progress under another section of the VSL Act. The explanatory memorandum sets out the rationale for this amendment:

The intention is to strengthen the Secretary's rights regarding revocation to prevent a provider requesting that its approval status is revoked voluntarily to circumvent compliance action being taken against it.67

Provisions of the VSL Levy Bill and the HELP Levy Bill 2.53 The VSL Levy Bill would establish the levy arrangements for VSL providers while the HELP Levy Bill would establish the levy arrangements for FEE-HELP and HECS-HELP providers.

2.54 The levy bills have three core purposes:

 to impose the corresponding VSL or HELP tuition protection levy;  to specify the amounts that are payable by various classes of providers; and  to prescribe the levy components and the manner in which, and by whom, they will be determined each year.68

64 Schedule 1, item 42 and schedule 2, item 34 of the Tuition Protection Bill.

65 Schedule 1, item 38, proposed section 113A and schedule 2, item 28, proposed section 238-7 of the

Tuition Protection Bill.

66 Schedule 1, item 38, proposed section 113A and schedule 2, item 28, proposed section 238-7 of the

Tuition Protection Bill.

67 Tuition Protection Bill, EM, p. 59.

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2.55 Part 2 of the levy bills sets out the three components of the tuition protection levy, as well as the method of calculating these amounts. The three components are:

 the administrative fee component;  the risk rated premium component; and  the special tuition protection component.69

2.56 The factors used in the calculations of the three levy components will be set out in legislative instruments made under the corresponding bill. The minister will make the legislative instrument in respect of the administrative fee component, while the Tuition Protection Director will make the legislative instrument in respect of the relevant risk rated premium component and the special tuition protection component.70

2.57 The explanatory memorandum to the VSL Levy Bill set out the reasoning behind this method:

The approach of using legislative instruments gives the minister and the [VSL Tuition Protection] Director flexibility in setting the various components of the levy to ensure the VSL Tuition Fund fulfils its purpose and that leviable providers pay an amount which reflects the current state of the Fund, the risk rating of each provider and its level of exposure in the VET Student Loans program.71

2.58 The explanatory memoranda to the levy bills notes that the approach will provide the minister and the relevant tuition protection director with flexibility in setting the various components of the levy to ensure the corresponding Tuition Protection Fund fulfils its purposes, and that leviable providers pay an amount which reflects the current state of the Fund, the risk rating of each provider and its level of exposure in the program.72

2.59 The explanatory memoranda to both levy bills stated:

The mechanism of setting components of the levy that reflect the costs of operating the tuition protection scheme and particular providers' risks of defaulting, by enabling flexible year-on-year adjustments through legislative instrument, is consistent with the successful and industry-accepted mechanism for the TPS Levy established under the Education Services of Overseas Students (TPS Levies) Act 2012.73

68 VET Student Loans (VSL Tuition Protection Levy) Bill 2019 (VSL Levy Bill), Explanatory

Memorandum (EM), p. 1. Higher Education Support (HELP Tuition Protection Levy) Bill 2019 (HELP Levy Bill), Explanatory Memorandum (EM), p. 1.

69 VSL Levy Bill, EM, p. 1; HELP Levy Bill, EM p. 7.

70 VSL Levy Bill, EM, p. 7; and HELP Levy Bill, EM, p. 7.

71 VSL Levy Bill, EM, p. 7. An equivalent explanation is set out in the HELP Levy Bill, EM, p. 7.

72 VSL Levy Bill, EM, p. 7; HELP Levy Bill, EM, p. 7.

73 VSL Levy Bill, EM, p. 7; HELP Levy Bill, EM, p. 7.

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2.60 Further detail on each of the components is set out below. The individual clauses mentioned refer to the clauses in both the VSL Levy Bill and the HELP Levy Bill which are identical.

Administrative fee component 2.61 The administrative fee component is intended to cover the ongoing administrative costs of the tuition protection arrangements, such as the remuneration of the respective Director, members of the corresponding

Advisory Board and any consultants engaged by the director to assist and support the performance of his or her role and functions.74

2.62 This component of the levy is payable by all leviable providers, although a new provider only pays part of the component in their first year.75

2.63 Clauses 8 specifies that a leviable provider's administrative fee component for a year is the sum of:

 the amount determined in an instrument under section 9 for the purposes of paragraph 8(2)(a) for the year; and  the amount determined in an instrument under section 9 for the purposes of paragraph 8(2)(b) for the year, multiplied by the total VSL students for the

provider for the year. 76

2.64 The explanatory memoranda note that by factoring in a provider's total VSL or HELP students for the year into the equation, the provider's degree of exposure in the respective programs can be taken into account.77

2.65 Clauses 9 sets out that the minister is responsible for making the legislative instrument setting the amounts used to calculate a leviable provider's administrative fee component.78

2.66 Clauses 10 provides for the indexation of both the administrative fee component, and also the upper limits of the amounts of the administrative fee component prescribed in subclause 9(3) of the bill.79

74 VSL Levy Bill, EM, p. 1; HELP Levy Bill, EM, p. 1.

75 VSL Levy Bill, EM, p. 1; HELP Levy Bill, EM, p. 1.

76 VSL Levy Bill, p. 5; see also VSL Levy Bill, EM, p. 8; HELP Levy Bill, p. 5; HELP Levy Bill, EM, p. 8

77 VSL Levy Bill, EM, p. 8; HELP Levy Bill, EM, p. 8.

78 VSL Levy Bill, p. 5; see also VSL Levy Bill, EM, p. 8; HELP Levy Bill, pp. 5-6; see also HELP Levy

Bill, EM, pp. 8-9.

79 VSL Levy Bill, pp. 6-7; see also VSL Levy Bill, EM, p. 9; HELP Levy Bill, pp. 6-7; see also HELP

Levy Bill, EM, pp. 9-10.

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Risk rated premium component 2.67 The risk rated premium component is intended to cover the risk of each provider defaulting. It is payable only by private providers; that is, it is not payable by TAFEs or by providers which are owned by the Commonwealth, a

State, or a Territory.80

2.68 Clauses 11 provide the method statement for how the component is to be calculated. The calculation is based on the provider's level of exposure under the corresponding VSL or HELP program, in terms of total student numbers and VSL or HELP loan amounts, as well as the provider's risk of default based on certain risk factors.81

2.69 Clauses 11 also state that if a leviable provider is a new provider for the year, the amount of the provider's risk rated premium component for the year is zero.82

2.70 Clauses 13 sets out that the relevant Tuition Protection Director is responsible for making the legislative instrument that is necessary to calculate a leviable provider's risk rated premium component.83

Special tuition protection component 2.71 The special tuition protection component is intended to be imposed on providers to allow the relevant tuition fund to grow. For example, it may be imposed in instances where the levy funds are below the 'target fund size' or to

insure against future systemic shocks. It is payable only by private providers.84

2.72 The explanatory memorandum to the HELP Levy Bill provided detail on the circumstances in which it could be imposed:

For example, it might be imposed in the early years to allow the [HELP Tuition Protection] Fund to grow to its target size. Alternatively, it might also be imposed in years of growth of the HELP program to build up contingency amounts in the Fund for future years.85

2.73 Clause 12 of the HELP Levy Bill states that a leviable provider's special tuition protection component for a year is an amount equal to the total amount of assistance paid to the provider under sections 96-1 and 110-1 of HESA in the

80 VSL Levy Bill, EM, p. 1; HELP Levy Bill, EM, p. 1.

81 VSL Levy Bill, p. 8; see also VSL Levy Bill, EM, p. 10; HELP Levy Bill, p. 8; see also HELP Levy Bill,

EM, p. 10.

82 VSL Levy Bill, p. 8; see also VSL Levy Bill, EM, p. 10; HELP Levy Bill, p. 8; see also HELP Levy Bill,

EM, p. 10.

83 VSL Levy Bill, p. 11; see also VSL Levy Bill, EM, pp. 9-10; HELP Levy Bill, pp. 9-10; see also HELP

Levy Bill, EM, p. 11.

84 VSL Levy Bill, EM, pp. 1, 10; HELP Levy Bill, EM, pp. 1, 10.

85 HELP Levy Bill, EM, p. 10.

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previous year, multiplied by the percentage determined in an instrument made under section 13 of the bill for the purposes of subsection 12(2) for a year.86

2.74 Clause 12 of the VET Levy Bill states that a leviable provider's special tuition protection component for a year is the total loan amount paid to the provider under section 19 of the VET Student Loans Act 2016 for the previous year, multiplied by the percentage determined in an instrument under section 13 of the bill for the purposes of subsection 12(2) for a year. 87

2.75 The VET Levy Bill explanatory memorandum stated:

Factoring in a provider's total VET student loans amounts for the previous years allows for each provider's contribution to be fair and proportionate to their participation in the VET Student Loans program.88

2.76 Clauses 12 also provides that if a leviable provider is a new provider for a year, the amount of the provider's special tuition protection component for the year is zero. 89

2.77 Clauses 13 sets out that the tuition protection director is responsible for making the legislative instrument that is necessary to calculate a leviable provider's special protection component.90

Senate Committee for the Scrutiny of Bills 2.78 The Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) considered the bills in its Scrutiny Digest 7 of 2019.

2.79 With regards to the Tuition Protection Bill it raised three matters:

 that significant matters would be set out in delegated legislation;  that broad discretionary power would be provided to the minister; and  that the directors would be provided with broad delegation of their administrative powers.

Significant matters in delegated legislation 2.80 In relation to significant matters being set out in delegated legislation, the Scrutiny Committee noted that the Tuition Protection Bill would allow the Rules and Guidelines to include matters relating to the tuition protection

86 HELP Levy Bill, pp. 8-9; HELP Levy Bill, EM, pp. 10-11.

87 VSL Levy Bill, p. 9; see also VSL Levy Bill, EM, pp. 10-11.

88 VSL Levy Bill, EM, p. 11. Note that an equivalent explanation is provided in the explanatory

memorandum to the HELP Levy Bill, p. 11.

89 VSL Levy Bill, p. 8; see also VSL Levy Bill, EM, pp. 10-11; HELP Levy Bill, p. 8; HELP Levy Bill,

EM, p. 10.

90 VSL Levy Bill, p. 11; see also VSL Levy Bill, EM, pp. 9-10; HELP Levy Bill, pp. 9-10; HELP Levy

Bill, EM, p. 11.

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scheme, including when tuition protection levies are due and payable, penalties for late payment of the levy, and any other matters relating to the collection and recovery of the tuition protection levy.91 The Scrutiny Committee noted the justification provided in the explanatory memorandum, namely, that the matters 'are primarily matters of administration and process regarding the collection and recovery of levy amounts, and do not impact on the setting of the levy amounts payable by the providers'.92 While acknowledging that some matters proposed to be included in the Rules and Guidelines may be administrative or procedural in nature, it noted that it was unclear why all the matters would be appropriate for inclusion in delegated legislation. 93 The Scrutiny Committee drew this scrutiny concern to the attention of senators.94

2.81 The Scrutiny Committee also noted that the Tuition Protection Bill would also allow the Rules and Guidelines to exempt classes of providers.95 The Scrutiny Committee acknowledged the need for flexibility to allow the tuition protection arrangements to develop responsively.96 However, it did not consider this to be a sufficient justification. It explained:

…the committee notes that it does not generally consider flexibility, on its own, to be sufficient justification for including significant matters (including broad exemptions) in delegated legislation. Further, while noting the information in the explanatory memorandum as to when providers may be exempted from the tuition protection scheme, the committee remains concerned that there appears to be no guidance on the face of the bill as to the circumstances in which exemptions may be appropriate.97

2.82 The Scrutiny Committee sought further advice from the minister.98

2.83 In response, the minister noted that it would not be desirable or necessary to include explicit guidance as to the circumstances in which providers may be exempt from the tuition protection arrangements.99 The minister explained the reasons:

91 Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee), Scrutiny Digest 7 of

2019, 16 October 2019, p. 21.

92 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 22.

93 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 22.

94 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 23.

95 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, pp. 22-23.

96 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 23.

97 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, pp. 22-23.

98 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 23.

99 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 66.

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This is because the circumstances and classes of providers for which it may be appropriate to exempt are not certain and cannot necessarily be foreseen. Specifying this detail in the delegated legislation may avoid the need to amend the primary legislation in order to exempt a class of provider not currently contemplated for an exemption.100

2.84 The minister also explained that the use of delegated legislation would allow for greater flexibility; allow for the administrative and technical details of the scheme to be amended quickly; and also provide for appropriate parliamentary scrutiny.101

2.85 The Scrutiny committee concluded by drawing these concerns to the attention of senators and the Senate Standing Committee on Regulations and Ordinances. 102

Broad discretionary power 2.86 The Scrutiny Committee noted that the Tuition Protection Bill would allow the minister to determine that the proposed tuition protection arrangements in schedule 2, part 5-1A, to not apply to a particular higher education provider.103

The Scrutiny Committee expressed concern that the provision would allow the minister to determine whether and how the tuition protection requirements apply to specific providers with 'little or no guidance on the face of the bill as to how the power is to be exercised'.104 Moreover, that the minister's determination would not be subject to tabling, disallowance and sunsetting requirements that applies to legislative instruments under the Legislation Act 2003.105 The Scrutiny Committee sought further information from the minister in relation to the following matters:

… why it considered necessary and appropriate to permit the minister to determine, by non-legislative instrument, individual providers to which the tuition protection scheme in proposed Part 5-1A of the Higher Education Support Act 2003 applies.

The committee also requests the minister's advice as to the appropriateness of amending the bill to:

• provide that determinations made under proposed subsection 166-5(2) are legislative instruments; and

100 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 67.

101 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 67.

102 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 68.

103 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 23.

104 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 24.

105 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 24.

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• provide at least high-level guidance as to how the minister's power to make such determinations is to be exercised.106

2.87 The minister advised that the determination by non-legislative instrument would enable the minister to 'react to changes in a dynamic sector, while retaining the discretion to consider the relevant and unique circumstance of individual providers'. Additionally, the minister's determination by non-legislation instrument would give certainty to providers as the minister's decision will not be subject to disallowance. 107

2.88 The minister also addressed the suggestion of amending the bills to provide the determinations to be legislative instruments and to provide high-level guidance as to how the minister's power is to be exercised:

On the question of the appropriateness of amending the TP Bill to provide that determinations made under proposed subsection 166-5(2) are legislative instruments, the overarching purpose of the Bill is to ensure that students are adequately protected in the event of provider failure. It is essential that changes in provider circumstances can be responded to rapidly and with certainty for students, as well as for the HELP Tuition Protection Director. This purpose can be achieved by retaining the current proposed subsection 166-5(4).

On the question of the appropriateness of amending the Bill to provide guidance on how the Minister is to make determinations under proposed subsection 166-5(2), it is impractical and restrictive to anticipate the factors that the Minister may take into account when considering whether to make a determination, and therefore, it is not appropriate to amend the Bill.108

2.89 The Scrutiny Committee drew its scrutiny concerns to the attention of senators and left the appropriateness of amending the bill to the Senate as a whole.109

Broad delegation of administrative powers 2.90 The Scrutiny Committee explained that the Tuition Protection Bill would provide the VSL Tuition Protection Director and the HELP Tuition Protection Director, with 'relatively significant functions' relating to the tuition protection

arrangements and the management of the corresponding tuition protection funds. 110 Moreover, the bill would allow the directors to delegate the majority of these powers or functions to a person holding or performing the functions of an Australian Public Service (APS) Level 6, or an equivalent or higher position. The Scrutiny Committee stated:

106 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, pp. 24-25.

107 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 68.

108 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 69.

109 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 70.

110 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 24.

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The committee has consistently drawn attention to legislation that allows the delegation of administrative powers to a relatively large class to persons, with little specification as to their qualifications or attributes. Generally, the committee prefers to see a limit set either on the scope of the powers that may be delegated, or on the categories of people to whom delegations are permitted. The committee's preference is that delegates be confined to holders of nominated officers, and/or to members of the Senior Executive Service (SES). Where broad delegations are provided for, the committee considers that an explanation as to why these broad delegations are necessary should be included in the explanatory materials.111

2.91 The Scrutiny Committee acknowledged the rationale provided in the explanatory memorandum, that the delegation to an APS 6 officer has been included because it is currently unclear the level of staff that will be assigned to assist the directors and, in the event of an unexpected increase in work, it would allow for affected students to receive assistance as soon as practicable. 112 However the Scrutiny Committee noted that 'it has not generally accepted operational or administrative flexibility as sufficient justification' 113 and sought the further advice from the minister.114

2.92 While acknowledging these concerns, the minister insisted that it was necessary and appropriate for the Tuition Protection Directors to be able to delegate their powers and functions to officers at the APS 6 level for the following reasons:

 A key role of the directors is to provide support to students when their provider defaults, which can cause significant disruption and stress to students. A delegation to only a SES level will not ensure that affected students are supported in a timely manner.

 It is likely that, in the event of a default, the volume of workload will be significant.  Most of the functions and powers of the directors are more administrative and process driven, whereas the critical functions of the directors in relation

to making legislative instruments have not been delegated.  Provisions in the Tuition Protection Bill will ensure that delegates exercising powers or functions under the Act must comply with the directions of the relevant director. This ensures the director will maintain overarching

oversight of any exercise of their power.115

111 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 25.

112 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 25.

113 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 26.

114 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 26.

115 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, pp. 70-72.

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2.93 The minister also explained that it was not necessary for the delegates to possess expertise particular to the delegated power or function as these powers and functions are general in nature.116

2.94 The Scrutiny Committee concluded by drawing its concerns to the attention of senators and leaving it to the Senate to determine the appropriateness of these matters.117

Charges in delegated legislation 2.95 In relation to the VSL Levy Bill and the HELP Levy Bill, the Scrutiny Committee noted that one of the 'most fundamental functions' of the Parliament is to impose taxation, and that consequently it was consistently of

the view that it was for the Parliament, rather than the makers of delegated legislation, to set rates of tax.118

2.96 The Scrutiny Committee explained:

Where it is proposed to include rates of tax in delegated legislation, the committee considers that, at a minimum, some guidance in relation to the amount of tax that may be imposed should be included in the enabling Act.

With regard to these matters, the committee notes that the bill provides that a percentage determined by legislative instrument under clause 13 may be zero, and that a risk factor value must be a number between one and 10. The committee also notes that, in making an instrument under clause 13, the Directors must have regard to the advice of the relevant advisory board, and must consider the sustainability of the Funds. Before an instrument under clause 13 is made, the Treasurer would also be required to approve the instrument in writing. The explanatory memorandum asserts that this 'provides an additional measure of scrutiny'.

However, the committee is concerned that, despite these requirements, there appears to be nothing on the face of the bill that would expressly limit the amount of the risk rated premium and special tuition protection components of the levy. By contrast, the committee notes that subclause 9(2) would expressly limit the dollar amount of the administrative fee component.119

2.97 In response to these concerns the minister advised that the levy bills provide for an upper limit that the administrative fee cannot exceed which was determined in consultation with the Australian Government Actuary (AGA).

116 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 72.

117 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 73.

118 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 32.

119 Scrutiny Committee, Scrutiny Digest 7 of 2019, 16 October 2019, p. 32.

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2.98 The minister noted that the methodology to calculate the risk rated premium component was also developed by the AGA. The methodology takes into consideration, for example, 'the provider's level of exposure under the relevant loan scheme in terms of total student numbers and loan amounts as well as the provider's risk of default based on certain risk factors such as volatility in student numbers, course completion rates, [and] length of operation'. The directors will follow the same process as the TPS Tuition Protection Director when determining certain amounts necessary to calculate a provider's risk rated premium. Furthermore, the minister and directors will consult with the sector as part of the annual levy setting process.120

2.99 The Scrutiny Committee requested that the key information provided by the minister be included in the explanatory memorandum and made no further comment on this matter.121

120 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 80.

121 Scrutiny Committee, Scrutiny Digest 8 of 2019, 13 November 2019, p. 81.

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Chapter 3 Key issues

3.1 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.

3.2 The chapter will conclude by outlining the committee view and recommendation.

Students paying fees upfront 3.3 Submitters were broadly supportive of the bills and the proposed expansion of the Tuition Protection Service (TPS).1 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.2

3.4 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.3

1 The College of Law, Submission 1, p. 1; BBI-The Australian Institute of Theological Education,

Submission 2, p. 1; Charles Sturt University, Submission 5, p. 1; Australian VET Research Association, Submission 7, p. 1; Christian Heritage College, Submission 8, p. 1; Adelaide Central School of Art, Submission 11, p. 1; Tertiary Education Quality and Standards Agency (TEQSA), Submission 13, p. 2; Macleay College, Submission 15, p. 1; National Union of Students (NUS), Submission 16, p. 2; and Alphacrucis College, Submission 17, p. 2;

2 Charles Sturt University, Submission 5, p. 1.

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3.5 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. 4

 It will increase the administrative burden and red-tape on providers.5  It will increase insurance premiums for providers who would likely pass on these costs to students through increased fees.6

3.6 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

3 Mr Simon Finn, Chief Executive Officer, IHEA, Committee Hansard, 12 November 2019, p. 5.

4 The College of Law, Submission 1, p. 1; Governance Institute of Australia, Submission 6, p. 1;

Australian VET Research Association, Submission 7, p. 1; Christian Heritage College, Submission 8, p. 1; The Institute of Internal Auditors-Australia, Submission 9, pp. 1-2; Adelaide Central School of Art, Submission 11, p. 1; Macleay College, Submission 15, p. 1; Alphacrucis College, Submission 17, p. 3; TAFE Directors Australia (TDA), Submission 18, p. 3; IHEA, Submission 19.1, p. 1.

5 BBI-The Australian Institute of Theological Education, Submission 2, p. 1; Christian Heritage

College, Submission 8, p. 1; The Institute of Internal Auditors-Australia, Submission 9, p. 2; and Alphacrucis College, Submission 17, p. 3;

6 The College of Law, Submission 1, pp. 1-2; BBI-The Australian Institute of Theological Education,

Submission 2, p. 1; Governance Institute of Australia, Submission 6, p. 2; The Institute of Internal Auditors-Australia, Submission 9, p. 3; and Macleay College, Submission 15, p. 1;.

27

arrangements are picking which students to protect based on an apparent assessment of the ability to pay.7

3.7 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'.8 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.9

3.8 IHEA acknowledged 'the likely burden of assessing the large number of independent VET providers required to achieve universal coverage' by 1 January 2020.10 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.11

3.9 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.12 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.13

3.10 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.14 Mr Finn advised that

7 Independent Tertiary Education Council Australia (ITECA), Submission 20, p. 5.

8 Tertiary Education Quality and Standards Agency (TEQSA), Submission 13, p. 2.

9 TEQSA, Submission 13, p. 2.

10 IHEA, Submission 19.1, p. 2.

11 IHEA, Submission 19.1, p. 2.

12 IHEA, Submission 19.1, p. 2.

13 IHEA, Submission 19.1, p. 2.

14 Mr Troy Williams, Chief Executive Officer, ITECA, Committee Hansard, 12 November 2019, p. 3.

28

students in the higher education sector with a full time load in a 'general degree course' would pay approximately $10 000 per year.15

3.11 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.16

3.12 Providers also raised concerns relating to rising insurance costs and the increasing reluctance of private insurance companies to provide cover.17 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.

3.13 Moreover, IHEA explained that since 2018 there has been one Australian Student Tuition Scheme (ASTAS) approved by TEQSA.18 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'.19

3.14 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

15 Mr Simon Finn, Chief Executive Officer, IHEA, Committee Hansard, 12 November 2019, p. 3.

16 Alphacrucis College, Submission 17, p. 2. See also IHEA, Submission 19.1, p. 3.

17 Governance Institute of Australia, Submission 6, p. 2; The Institute of Internal Auditors-Australia,

Submission 9, pp. 3-4; BBI-The Australian Institute of Theological Education, Submission 2, p. 1; and IHEA, Submission 19.1, p. 4.

18 IHEA, Submission 19.1, p. 4.

19 ITECA, Submission 20, p. 5.

29

Consumer Commission to seek a refund of their upfront fees from a provider that has closed.20

3.15 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).21

3.16 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.22

3.17 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.23

3.18 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:

(a) Being a member of ASTAS; (b) Holding an unconditional bank guarantee for the amount of prepaid fees for each student; or

(c) Electing not to collect upfront fees of $1500 or more.24

20 Department of Employment, Skills, Small and Family Business (Department of Employment),

Submission 4, p. 9.

21 Department of Education, Submission 12, p. 5.

22 Ms Nadine Williams, Deputy Secretary, Skills and Training, Department of Employment,

Committee Hansard, 12 November 2019, p. 17.

23 Mr George Thievos, First Assistant Secretary, VSL, VET Compliance and TRA Division,

Department of Employment, Committee Hansard, 12 November 2019, p. 20.

24 Department of Employment, Submission 4, p. 9.

30

3.19 Ms Williams confirmed that when ASTAS ceases to provide tuition assurance, providers will still have two other avenues to provide tuition assurance.25 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.26 Mr Thievos stated that both the Department of Employment and ASQA would nevertheless be monitoring events closely.27

Potential burden on TAFEs 3.20 A number of submitters argued that, with respect to the VET sector, TAFEs would be subsidising for-profit private providers.28 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.29 The AEU argued that the VET sector had suffered reputational damaged due to the actions of private, for-profit RTOs.30 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.31

3.21 Both the AEU and TAFE Directors Australia (TDA) ultimately recommended that TAFEs not be subject to the administrative fee component of the levy.32

3.22 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.33 The TDA posited that good providers may be carrying the risk of

25 Ms Nadine Williams, Deputy Secretary, Skills and Training, Department of Employment,

Committee Hansard, 12 November 2019, p. 17.

26 Mr George Thievos, First Assistant Secretary, VSL, VET Compliance and TRA Division,

Department of Employment, Committee Hansard, 12 November 2019, p. 18.

27 Mr George Thievos, First Assistant Secretary, VSL, VET Compliance and TRA Division,

Department of Employment, Committee Hansard, 12 November 2019, p. 20.

28 Australian Education Union (AEU), Submission 10; TDA, Submission 18, pp. 4-5; and NUS,

Submission 16, pp. 3-4.

29 AEU, Submission 10, pp. 2-3.

30 AEU, Submission 10, p. 7.

31 AEU, Submission 10, p. 7.

32 AEU, Submission 10, p. 8.

33 TAFE Directors Australia, Submission 18, p. 2.

31

poor decisions or poor oversight by the Secretary.34 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.35

3.23 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.36

3.24 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.37

3.25 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.38 TDA explained:

34 TDA, Submission 18, p. 2

35 Mr Craig Robertson, Chief Executive Officer, TDA, Committee Hansard, 12 November 2019, p. 9.

36 Mr Craig Robertson, Chief Executive Officer, TDA, Committee Hansard, 12 November 2019, p. 9.

37 Mr Ronald Jackson, Director, Strategy and Tertiary Financing, TDA, Committee Hansard,

12 November 2019, pp. 11-12.

38 TDA, Submission 18, pp. 2-5. See also AEU, Submission 10, p. 8.

32

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.39

3.26 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.40

3.27 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.41 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.42

3.28 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.43

3.29 Ms Karen Sandercock, Group Manager from the Department of Education reiterated that:

39 TDA, Submission 18, p. 4.

40 TDA, Submission 18, p. 5.

41 Department of Employment, Submission 4, p. 7.

42 Ms Nadine Williams, Deputy Secretary, Skills and Training, Department of Employment,

Committee Hansard, 12 November 2019, p. 15.

43 Mr George Thievos, First Assistant Secretary, VSL, VET Compliance and TRA Division,

Department of Employment, Committee Hansard, 12 November 2019, p. 18.

33

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.44

3.30 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'.45 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.46

Transparency of costs to providers and the need for more broad consultation 3.31 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.47

3.32 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'.48

3.33 ITECA argued that consultation with independent providers would be essential to ensure the success of the arrangements:

44 Ms Karen Sandercock, Group Manager, International, Department of Education,

Committee Hansard, 12 November 2019, p. 19.

45 Department of Employment, Submission 4, p. 7.

46 Department of Employment, Submission 4, pp. 7-8.

47 ITECA, Submission 20, p. 3.

48 IHEA, Submission 19.1, p. 4.

34

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.49

3.34 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.50

3.35 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.51 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.52

3.36 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.

3.37 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'.53

3.38 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:

49 ITECA, Submission 20, p. 4.

50 Mr Craig Robertson, Chief Executive Officer, TDA, Committee Hansard, 12 November 2019, p. 10.

51 National Union of Students, Submission 16, p. 4.

52 Mr Lachlan Barker, National Education Officer, NUS, Committee Hansard, 12 November 2019, p. 8.

53 ITECA, Submission 20, p. 4.

35

…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.54

3.39 The NUS sought further clarity around the special tuition protection component and specifically, the projected amount for the target fund size. 55

Committee view 3.40 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.56

3.41 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.

3.42 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.

3.43 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

54 National Union of Students, Submission 16, p. 3.

55 National Union of Students, Submission 16, p. 3.

56 The Hon Steve Irons MP, Assistance Minister for Vocational Education, Training and

Apprenticeships, House of Representatives Hansard, 18 September 2019, p. 3363.

36

domestic upfront fee paying students, should their course not be provided as forecast.

3.44 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.

3.45 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.

3.46 The committee reiterates its support for the introduction of a national tuition protection system, modelled on the successful TPS arrangements.

Recommendation 1

3.47 The committee recommends that the bills be passed.

Senator the Hon James McGrath Chair

37

Labor Senators' Additional Comments

1.1 Labor Senators cautiously welcome the Education Legislation Amendment (Tuition Protection and Other Measures) Bill 2019, VET Student Loans (VSL Tuition Protection Levy) Bill 2019 and the Higher Education Support (HELP Tuition Protection Levy) Bill 2019.

1.2 Labor Senators support the practical effect of introducing protections for students with VSL/HELP loans and simpler processes for decision-making, student placement, and VSL/HELP loan re-crediting. Students should be protected and assisted in instances of provider or course closure.

1.3 Submitters to the inquiry were broadly supportive of the legislation, but raised two key concerns that are shared by Labor Senators. First, the proposed arrangement places an unreasonable financial burden on TAFEs and TAFE students who use student loans given the secure nature of public providers backed by state governments, while also effectively requiring TAFEs to provide for students displaced from failed private providers. Second, the proposed tuition protection arrangement will not cover full-fee paying domestic students, creating a complex situation where different students will have different rights and protections.

Concerns relating to TAFEs 1.4 TAFE institutions have a history of providing high quality technical, further and general education and should be the backbone of Australia’s skills and training sector. The largely unrivalled consistency and quality of TAFE in the

vocational education training sector should be protected and supported.

1.5 Labor Senators share the concerns of TAFE Directors Australia (TDA) that students attending TAFEs, like public universities, are effectively guaranteed by their relevant state government and do not present a risk to student fees that justify TAFEs financial inclusion in the scheme. There is a very real risk that students accessing student loans in order to attend TAFE will end up bearing a portion of the cost of securing tuition protection for students who have accessed a student loan to attend a private provider. Mr Jackson from TDA states:

It is partly setting up a scheme that only covers 14 000 students at a significant cost to the public sector, when in fact the public sector is already insuring its students by being state owned. So the question in some ways is around the economics of just having a scheme for 14 000 VET student loan students, when probably the greater risk is for those full-fee-

38

paying students who are outside it, except full-fee-paying with TAFEs, who are actually guaranteed by their state government anyway.1

1.6 Further demonstrating the case that TAFE students have no significant risk of losing coverage of their loans, the Department of Employment, Skills, Small and Family Business confirmed that:

The Department has managed interim Tuition Assurance arrangements from 1 January 2018. During this period no TAFE students have sought course assurance or been eligible for a re-credit of any part of their loan.2

1.7 On the basis that TAFEs pose no risk to student loans, Labor Senators are of the view that it would be appropriate to carve out TAFE from the proposed financial arrangements. As highlighted in evidence to the committee, TAFEs will be relied on in the arrangements under this legislation to enable students to complete their studies in the event of private provider or course closure. TAFEs should be exempt from administration fees and financial levies imposed by the scheme, noting that this should not affect their obligation to enrol students who fall back on the public provider to finish their course or qualification. This legislation essentially relies on TAFE as a public provider of last resort in the event of a closure, while insisting that it insure its own students. As state government public institutions this is a contradictory and unreasonable obligation.

Universal coverage 1.8 A majority of submitters raised concern that the proposed tuition protection arrangements would not extend to full-fee paying students.

1.9 Labor Senators are supportive of the Commonwealth mitigating its own potential financial risk in the FEE-HELP loan book, with a tuition protection scheme protecting students when a provider ceases to operate or has their course cancelled for other reasons.

1.10 However, Labor is concerned that the proposed tuition protection arrangements leave full-fee paying students vulnerable.

1.11 Labor Senators note that due to the 20 per cent levy on the value of FEE-HELP loans, there is a considerable incentive for students to pay upfront.

1.12 Labor Senators note that private providers do already bear a legal obligation to provide tuition protection for fee paying students, and that students may seek recourse via the Australian Competition and Consumer Commission (ACCC). However, Labor Senators are concerned that the scheme entrenches complex arrangements where different students have different rights and protections.

1 Mr Ronald Jackson, Director, Strategy and Tertiary Financing, TAFE Directors Australia,

Committee Hansard, 12 November 2019, p. 13.

2 Department of Employment, Skills, Small and Family Business, answers to questions taken on

notice, 12 November 2019 (received 15 November 2019).

39

1.13 Labor Senators note that the Independent Tertiary Education Council Australia (ITECA) insurance scheme is being disbanded and that the remaining guarantees for these students will only consist of a bank guarantee or a requirement that an institution not charge more than $1500 up front.

1.14 The legislation, while providing protection for FEE-HELP paying students within private providers for the first time, leaves behind upfront fee paying students and places the business viability of some of these private institutions at risk, with flow on impacts for students.

1.15 ITECA has highlighted in evidence to the committee that savvy students will be likely to seek at least a small portion of a FEE-HELP loan in order to avail themselves of the protections under this legislation.

1.16 Labor Senators are concerned by the suggestion of the Department of Education that students who have paid their tuition fees upfront should seek recourse via the ACCC. As highlighted by Mr Troy Williams of ITECA, students are not likely to receive compensation for fees paid to a provider because the provider is likely to be in liquidation and no longer operating.

In answer to your question on the ACCC, we found them to be quite helpful. But there's a structural issue. If the department's advice is—and it has been in past—for a student from a college that is no longer operating to go the ACCC, the ACCC's ability to support that student is compromised simply because the company is usually in administration. The options available to the ACCC are very limited in those circumstances.

But, as I said, in those circumstances, its ability to support the student, who we feel for—we deal with these students on a daily basis—is compromised because the company is no longer operating or is in administration or liquidation.3

1.17 The proposed legislation will lead to a more complex system for students to navigate and could place some students at a disadvantage. For providers, the legislation will go some way to entrenching different protection arrangements for different cohorts of students, which by its nature will create a more complicated regulatory environment in which providers will operate.

Conclusion 1.18 Labor Senators are supportive of the legislation, but remain concerned that the primary motivation for this legislation is to protect government loans, not students, and certainly not the TAFE sector.

3 Mr Troy Williams, Chief Executive Officer, Independent Tertiary Education Council Australia,

Committee Hansard, 12 November 2019, p. 4.

40

1.19 Labor Senators call on the government to exempt TAFEs from making financial contributions to the proposed arrangements on the basis that TAFEs are effectively guaranteed by their relevant state government.

1.20 Labor also calls on the government to monitor tuition protection arrangements for full-fee paying students, particularly as ITECA withdraws their tuition assurance product from the market, to ensure that all students have access to adequate tuition protection and that students are not disadvantaged because they paid their fees upfront.

Senator Louise Pratt Senator Deborah O'Neill

Deputy Chair Member

41

Australian Greens Senators' Additional Comments

1.1 The Australian Greens thank all of the submitters to the inquiry.

Impact on TAFEs 1.2 A publicly owned and properly funded TAFE system plays an essential role in building an economically and socially just society by offering lifelong educational opportunities and skills development. We believe vocational

education and training (VET) should be provided primarily through the public TAFE system.

1.3 While recognising stakeholders’ support for tuition protection arrangements that appropriately safeguard students, the Australian Greens are concerned about the impact the expansion of the Tuition Protection Scheme (TPS) will have on TAFEs.

1.4 The Australian Greens share the view expressed by the Australian Education Union (AEU) in their submission that:

[S]tudents 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.1

1.5 The Australian Greens believe the cost to providers of participating in the TPS should match their risk of default. This is reflected in the exemption of low risk Table A providers from the administrative levy. TAFEs similarly low risk of default means they are unlikely to default in a manner which triggers the TPS. As such, TAFEs participation in the scheme will be primarily as a second provider, accepting students from providers who have defaulted on their obligations to students. We note the evidence provided by TAFE Directors Australia (TDA) that participation in the TPS is 'going to cost TAFEs around $670 000 a year just in administration'.2 This amounts to TAFEs using funding that could otherwise have gone to training to subsidise a scheme their students are unlikely to benefit from.

1.6 In light of their similar risk profile to Table A providers and the burden of TAFEs subsidising the scheme, the Australian Greens believe it is inappropriate to require TAFEs to pay for the administration of the TPS. As

1 Australian Education Union, Submission 10, p. 7.

2 Mr Ronald Jackson, Director, Strategy and Tertiary Financing, TAFE Directors Australia,

Committee Hansard, 12 November 2019, pp. 11-12.

42

such, the Australian Greens support the recommendations of the AEU, TDA and the National Union of Students (NUS).

Recommendation 1

1.7 The Australian Greens recommend the Bills be amended to exempt TAFEs and government-owned providers from the administrative levy.

Composition of the Tuition Protection Fund Advisory Board 1.8 The role of the VSL and HELP Advisory Boards is to provide advice and make recommendations to the corresponding Director in relation to setting the VSL Levy and HELP Levy. TDA expressed to the committee that:

Current members with education background, apart from the chair, are not experienced in tertiary education, especially vocational education and would not be alert to the inherent risks in the sector’s schemes and volatility around closures.3

1.9 Recognising their long-standing expertise in tertiary education and role as second providers to students from providers in default and long-standing expertise in tertiary education, the Australian Greens believe the Advisory Board should have one or more representatives of TAFEs among its membership as well as other members with experience in the sector.

Recommendation 2

1.10 The Australian Greens recommend the Bills be amended to require the inclusion of at least one TAFE representative on the TPS Advisory Board.

The Tertiary Education Context 1.11 The Bills are best considered in their context of Australia’s complex tertiary education environment. The Australian Greens thank submitters to the inquiry for their broader feedback on the Liberal-National Government’s approach to

education and training and their neglect of VET in particular.

1.12 It is clear, as the NUS submitted, that '[f]or vocational education to become a more secure and attractive option for students, more must change in the public discourse and national strategic policy spaces'.4 No expansion of tuition protection measures can wholly mitigate the systemic risk introduced by the ongoing shift of public funding for training from low-risk TAFEs and public institutions to high-risk for-profit providers, as detailed in the AEU submission. It’s vital the Parliament be mindful when extending tuition protection to not give students a false sense of security in commencing education with for-profit providers at greater risk of default.

3 TAFE Directors Australia, Submission 18, p. 5.

4 National Union of Students, Submission 16, p. 4.

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1.13 These Bills do nothing to address the destruction the Liberal-National Government has wrought on public VET in Australia: skills and training have been underfunded by tens of millions of dollars, the $4 billion Education Infrastructure Fund was recently abolished and the number of students in nationally-recognised programs dropped 16.2 per cent from 2015 to 2018 while we have a national shortage of skilled workers in 27 of 33 technician and trades categories.5 Even with new tuition protection arrangements in place, students will continue having to handle prohibitive loan fees and the severe disruption that any provider closure entails.

1.14 To support students and build a socially and economically just society, the Government must reverse its underfunding of skills and training and restore publicly owned, fully funded providers to the centre of the VET system.

Senator Mehreen Faruqi Member

5 Ratings Summary - Labour Market Analysis of Skilled Occupations, Department of Employment,

https://docs.employment.gov.au/system/files/doc/other/ratingssummary_june2019_ 0.pdf

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Appendix 1

Submissions and additional information

Submissions 1 College of Law

2 BBI-The Australian Institute of Theological Education 3 Tuition Protection Service 4 Department of Employment, Skills, Small and Family Business 5 Charles Sturt University 6 Governance Institute of Australia 7 Australasian VET Research Association 8 Christian Heritage College 9 Institute of Internal Auditors-Australia 10 Australian Education Union 11 Adelaide Central School of Art 12 Department of Education 13 Tertiary Education Quality and Standards Agency 14 Innovative Research Universities 15 Macleay College 16 National Union of Students 17 Alphacrucis College 18 TAFE Directors Australia 19 Independent Higher Education Australia

 19.1 Supplementary submission

20 Independent Tertiary Education Council Australia  20.1 Supplementary submission

Additional Information 1 Additional information received from the Tertiary Education Quality and Standards Agency on 21 November 2019.

Answer to Question on Notice 1 Department of Employment, Skills, Small and Family Business, answers to written questions on notice 13 November 2019 (received 15 November 2019). 2 Department of Employment, Skills, Small and Family Business, answers to

questions on notice 12 November 2019 (received 15 November 2019). 3 Independent Tertiary Education Council Australia, answers to questions on notice, 12 November 2019 (received 15 November 2019). 4 Department of Education, answers to written questions on notice

13 November 2019 (received 19 November 2019).

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Appendix 2

Public hearing and witnesses

Tuesday, 12 November 2019 Committee Room 2S1 Parliament House Canberra

Independent Tertiary Education Council of Australia  Mr Troy Williams, Chief Executive Officer  Mr Felix Pirie, Director, Policy and Research

Independent Higher Education Australia  Mr Simon Finn, Chief Executive Officer  Dr Sally Burt, Policy and Research Manager

TAFE Directors Australia  Mr Craig Robertson, Chief Executive Officer  Mr Ronald Jackson, Director Strategy and Tertiary Financing

National Union of Students  Ms Desiree Cai, National President  Mr Lachlan Barker, National Education Officer

Department of Employment, Skills, Small and Family Business  Ms Nadine Williams, Deputy Secretary, Skills and Training  Mr George Thiveos, First Assistant Secretary, VSL, VET Compliance and TRA Division  Mrs Belinda Campbell, Assistant Secretary, Tuition Assurance Taskforce

and TRA Branch  Mr Chris Alach, Assistant Secretary, Skills Programs Compliance Branch  Ms Amanda Cock, Director, Tuition Assurance Strategy Team

Department of Education  Ms Karen Sandercock, Group Manager, International  Mr Travis Power, Branch Manager, Quality Frameworks Branch  Mr Damian Coburn, Branch Manager, HELP and Provider Integrity Branch