CHAPTER 2


CHAPTER 2

Key issues

2.1        This chapter discusses the key issues raised in submissions to the committee about the bills.

Tuition Protection Service

2.2        Establishing the proposed Tuition Protection Service (TPS) is at the core of this legislation. The TPS would be a universal scheme designed to strengthen tuition protection by providing:

  • a single point of placement (or refund as a last resort service), which will provide a larger pool of resources and greater ability to deal with any closures;
  • a full range of placement options and greater student choice;
  • a more efficient and flexible service with one contact point for students, one set of fees for providers and greater accountability to Government;
  • a more robust and sustainable system which will ensure enhanced reputational benefits for all providers across the sector and no future requirement for Government financial assistance;
  • provider benefits through placing students affected by a closure; and
  • improved sustainability and accountability mechanisms.[1]

2.3        Rather than a body as such, the TPS is a concept for an overall system of tuition protection comprising the following elements:

  • the TPS director;
  • the TPS advisory board;
  • a secretariat to support the director and board;
  • a placement facility; and
  • a TPS levy.

2.4        Submissions to the inquiry largely supported the establishment of a single layer TPS and recognised the benefits of streamlining the approach to refund arrangements and student placement, despite some differing views on how best to achieve this.[2]

2.5        However, some potential drawbacks were identified. The Independent Schools Council of Australia (ISCA), for example, noted that:

...as amendments to the ESOS Act and the National Code of Practice are adopted, there is the potential for negative impacts on non-government schools, as well as changes that will be needed to current policies and procedures.[3]

2.6        To address the potential impacts on non-government schools, ISCA sought reassurance that the latter would not be financially penalized by the introduction of new compliance fees and charges.

2.7        In addition, ISCA raised the prospect of schools with smaller cohorts of international students being financially disadvantaged. ISCA pointed out that non-government schools with over 50 international students enrolled would benefit from a reduction in the new Annual Registration Charge. However, 87 per cent of independent, CRICOS (Commonwealth Register of Institutions and Courses for Overseas Students) registered schools have fewer than 50 overseas student enrolments. As a consequence, ISCA contends, independent schools with small numbers of overseas students could opt not to remain registered with CRICOS.[4]

Stakeholder consultation

2.8        The committee notes that some industry stakeholders were dissatisfied with the level of consultation prior to the legislation being introduced into Parliament. ACPET, in particular, expressed the following concerns:

Consultation with ACPET has been by way of a small number of irregular briefings from the Department of Education, Employment and Workplace Relations (“DEEWR”), typically by phone, regarding the high-level aims and components of the ESOS bills, prior to their introduction into parliament. ACPET welcomes this approach as an initial consultation strategy, but this approach alone does not constitute meaningful consultation, given the ‘devil’ is often in the detail of legislation. Consultation on the detail of complex legislation prior to its introduction into parliament assists the government in delivering rigorous, relevant and clear policy from the outset.[5]

2.9        The committee asked Mr Michael Hall, Deputy CEO of ACPET, about these concerns during the course of a public hearing held for this inquiry. In particular, the committee asked whether ACPET had received the discussion paper Reforming ESOS: consultations to build a stronger, simpler, smarter framework for international education in Australia, and was informed that Mr Hall believed ACPET would have received the document. The committee was therefore reassured that ACPET had every opportunity to make a submission during the government's consultation phase, before the legislation was introduced into Parliament.[6]

2.10      The committee put ACPET's concerns to DEEWR, and received the following response:

The department is committed to consultation and communication with stakeholders. Obviously this is a thing that is difficult to get right...That does not mean that we have always agreed with every stakeholder, and that does not mean that necessarily we have been able to have all the meetings they would have liked. However, we have always been accessible, and during the remainder of the process will remain accessible. We have regular contact with all of them. In 2011 the department considered 52 written submissions and held targeted discussions with all the key peak bodies to inform the development of the bills. Around five discussions were held with ACPET alone. There will be further consultation on any related legislative instruments. The tuition protection scheme advisory board will include representation across the sectors, ensuring industry participation and transparency in the risk component of the TPS charges.[7]

Committee view

2.11      The committee notes evidence given by representatives of DEEWR indicating that the department is currently drawing up a communications plan in order to ensure that stakeholders are aware of their rights and responsibilities if the proposed legislation is passed.[8] The committee commends DEEWR on this initiative.

2.12      The committee supports and encourages continued communication between government and industry stakeholders, and believes adequate steps are being taken to ensure individual providers and peak bodies have the opportunity to provide input.

Recommendation 1

2.13      The committee recommends that the Department of Education, Employment and Workplace Relations provides explanatory guides for industry stakeholders outlining compliance obligations and related potential penalties.

National registration

2.14      The proposed legislative amendments seek to allow national registration for education providers operating in more than one state or territory, or in a number of locations within a single state.

2.15      Currently, the ESOS Act requires providers to be separately registered to provide courses in each state. In practice this means that providers routinely have more than one CRICOS registration. Addressing this would reduce duplication of effort, support risk management, streamline processes for providers and allow for more flexibility for national regulatory bodies by reducing the regulatory burden.[9]

2.16      However, concerns were raised in relation to transitionary arrangements. Notably, the Australian Council of Private Education and Training (ACPET) stated:

Of concern to ACPET members is the apparent silence in the ESOS bills in relation to transitionary arrangements and how registration fees paid beyond 1 July 2012 will be refunded and/or dealt with. A detailed description of how this change will be implemented needs to be provided.[10]

2.17      ACPET further expressed its concern about the viability of the TPS fund during the transition period, arguing that the proposed model risked funds '...being depleted by current and future calls during the transition period within this first year.'[11]

Notification of default

2.18      Providers default when they do not provide the course a student has paid for. A student is considered to have defaulted if he or she:

  • does not commence their course;
  • withdraws from their course; or
  • is withdrawn from the course for non-payment of fees, visa breach or misbehaviour.

2.19      A number of submissions were unhappy with proposed changes to reporting timeframes relating to student and provider default, under which providers would be required to notify the Secretary of DEEWR and the TPS Director within 24 hours of a provider or student default.

2.20      The ESOS Act as it stands requires providers to give this notification of default within 14 days. Providers reported being satisfied with this notification requirement. However, DEEWR informed the committee that a significant number of providers were currently not meeting even this requirement, sometimes with serious consequences for students:

The requirement on providers to advise the delegate and the TPS director of a default promptly minimises delays in any necessary response to students. It starts the clock ticking for any refunds required. For student defaults, stringent notification requirements will also ensure that providers are closely monitoring student commencements and seeking to contact students who have not arrived at the expected time. The department has been aware of significant delays before providers have become aware that individual students have gone missing—some in very grievous circumstances—and these cases have been taken up directly with me by representatives of overseas governments. They are watched very closely. As another piece of context, in the last six months 37 per cent of notifications from universities have been late beyond the existing 14-day period. That compares with 17 per cent of notifications from other forms of providers.[12]

2.21      There was a clear indication that some submitters considered this timeframe unrealistic and unnecessarily burdensome for providers. English Australia warned of '...the potential to inundate the department with a flood of paperwork that will not necessarily produce outcomes.'[13]

2.22      A submission from Innovative Research Universities (IRU) echoed this view, adding that 24 hours was a '...very short period in which to have a legislatively driven requirement to act.'[14]

2.23      Australia was adamant that a 24-hour notification period was simply unrealistic and unnecessary:

This timeframe is unrealistic and cannot realistically be complied with. Universities enrol thousands of international students. Many international students may decide not to commence their course or withdraw from their course. This happens all the time and is reported to DEEWR and DIAC [Department of Immigration and Citizenship] via PRISMS [Provider Registration and International Students Management System] for which providers have 14 days. The same applies in relation to enrolment cancellations based on non-payment of fees, visa breaches or misbehaviour. The number of potential notifications from all universities under the student default categories could number in the hundreds on any one day. A notification period of 24 hours simply cannot be met. Given that providers already have to report these student course variations via PRISMS within 14 days, it seems unnecessary to move to such a short timeframe.[15]

2.24      Universities Australia explained that a shorter notification period would necessitate more expenditure on staff, and pushed for the current 14 day notification requirement, to be left in place for student defaults at least:

The amount of additional compliance and finance staff that would be required to actually attempt to comply with the 24-hour reporting period, or even a 72-hour reporting period as was recommended by the House of Representatives committee, would be a very large impost for institutions.

We would like to see 14 days. We do not see that that has created problems in the past. In DEEWR's submission they indicated that they want a shorter reporting period because students might need to be referred to the TPS or because there might be some welfare issue. I understand that in terms or provider default we do not have a concern about there being a shorter reporting period for provider default, because students might need to be referred to the TPS director to be placed in another institution, or something like that, if that were to occur. It is the issue around student default, where the students would not need to be referred to the TPS unless further down the line they did not get a refund in time.[16]

2.25      IRU initially supported amending the proposed legislation to include a 72-hour notification requirement:

In response to these concerns, raised by IRU and other parties, the House of Representatives Standing Committee on Education and Employment recommended that the 24 hour requirement be amended to a 72 hour reporting requirement. The IRU supports this proposal as a viable means to ensure there are protections in place to deal with those providers unable to fulfil their obligations to students and to identify students in breach of their visas while permitting universities and other committed providers of education services to international students to operate effectively without risk of failing to meet unrealistic reporting requirements.[17]

2.26      IRU's position changed during the course of the inquiry, following discussion with member universities:

Further discussions with IRU member universities, and their respective international offices, have indicated very serious concerns about the feasibility of the proposed reporting requirement timeframe even if extended to 72 hours. Due to the large number of international students and consequent array of minor changes to planned enrolments the requirements of the Bill are impossible to meet. They would result in unwarranted penalties for non-compliance in regard to notifications for minor changes in arrangements and minor breaches of formal requirements.

IRU strongly endorses a system which protects student welfare and ensures students receive a quality learning experience in Australia. Universities already have systems in place which address international student default reporting into DEEWR (now DIISRTE) and DIAC via the Government’s PRISMS system – allowing 14 days for notification.[18]

2.27      As with IRU, Universities Australia initially supported a 72 hour reporting requirement, but shifted to the view that even this was unrealistic following consultation with member universities.[19]

2.28      The Queensland Department of Education and Training International also called for the reporting timeframe to be extended:

This impact of legislated timeline notifications on all education providers is extremely high...Natural justice should allow a sufficient period of time to elapse prior to reporting of student default.[20]

2.29      This view was bolstered by a submission from Australian Government Schools International, which held that a 24 hour reporting requirement was unrealistic for large government school providers and would not be able to be complied with.[21]

2.30      However, ACPET reported receiving feedback from members indicating displeasure at the reporting requirement, but found the requirement reasonable and fair '...if they [providers] have access through PRISMS of the software system and they can report on that.'[22]

2.31      Having heard and taken on board the message from providers across the education sector, the committee sought an explanation from DEEWR as to the significant shortening of the notification period being proposed. Representatives of DEEWR told the committee that setting the notification requirement was a judgement call, '...whether you make it 24[hours], 48, a week, two weeks',[23] but that there was a definite need to draw providers' attention to the importance of reporting defaults promptly:

As to it being 24 hours, you have heard the arguments about that period; it can be argued one way or the other, and it is a judgment call. We felt that that was the best way of drawing attention to the importance of the universities and the other providers keeping records, keeping track of the students and letting us know as soon as there is an apparent problem. It is going to perfectly easy on the system to reverse those entries; if a plane has been delayed or something like that, it can easily be fixed up. But we felt it necessary to recommend a significant escalation of the current requirement in order to emphasise the importance of that.[24]

Committee view

2.32      The committee notes that this was one of the key issues submitters raised regarding the proposed legislation, and appreciates the point that complying with the 24 hour notification requirement would come at considerable cost to many providers.

2.33      That notwithstanding, the committee concurs with DEEWR in that '...[t]he welfare of overseas students in this country is a serious concern, and providers have a duty of care.'[25] Furthermore, the committee notes DEEWR's assurance that the notification system for providers will certainly be online, making reporting a relatively straightforward process.[26]

2.34      The committee also appreciates that setting the notification requirement is, as DEEWR pointed out, a matter of judgement. The committee is not convinced that providers would find this requirement impossible to comply with, and believes providers will take the necessary steps to ensure that adequate resources are directed towards this end. At the same time, the committee questions whether a 24 hour notification requirement is necessary, particularly given the implications arising from a default the day before a weekend or public holiday, when no one would be available to receive the notification, as emerged in evidence.[27] The committee believes that amending the provision in question to require notification within three working days, instead of 24 hours, is a solid compromise and the best way forward.

Recommendation 2

2.35      The committee recommends that Schedule 1, Part 1, Division 2, Subdivision A, Clause 46B of the Education Services for Overseas Students Legislation Amendment (Tuition Protection Service and Other Measures) Bill 2011 be amended to require providers to notify the regulator within three working days of a provider default.

Recommendation 3

2.36      The committee recommends that Schedule 1, Part 1, Division 2, Subdivision B, Clause 47C of the Education Services for Overseas Students Legislation Amendment (Tuition Protection Service and Other Measures) Bill 2011 be amended to require providers to notify the regulator within three working days of a student default.

Pre-paid fees

2.37      Schedule 3 of the ESOS Legislation Amendment (Tuition Protection Service and Other Measures) Bill 2011 proposes changes to the way that providers may deal with student tuition fees.

2.38      Currently, some course fees are able to be paid entirely upfront. Under the proposed changes, providers would be limited in the amount of pre-paid fees they could collect, and required to place these fees into a designated account in order to ensure adequate funds are available when refunds are needed. This, DEEWR stated:

...will ensure providers are able to meet their refund requirements should the provider default or the student’s visa application be refused and will assist in encouraging sustainable business practices. This proposal will also make study in Australia more affordable for students as they will no longer be required to pay large amounts of course fees up front to their provider.[28]

2.39      In terms of limitations on the collection of fees, providers would still be able to collect up to 50 per cent of course fees before a course commences, and no more than one study period in advance after the course commences. The 50 per cent limitation would not apply when the relevant course has only one study period, of up to 24 weeks. The principal objective of setting this limit is to:

...support the sustainability of the tuition protection service by reducing the potential refund liability of the entire sector. At the same time this measure seeks to balance protecting student fees with the need to give providers some certainty of income and ensure overseas students have sufficient resources to meet ongoing costs while studying in Australia.[29]

2.40      Some submissions, such as that from English Australia, felt the move toward limiting pre-paid fees was a misguided 'one size fits all' approach stemming from a lack of understanding of how English Language Intensive Courses for Overseas Students (ELICOS) providers work, and risking a range of negative consequences. English Australia argued that the approach had the potential to:

...seriously de-stabilise a provider's business model as they can no longer make accurate predictions regarding ongoing enrolments.[30]

2.41      These billing challenges, English Australia argued, would be significant:

If the whole course is eight weeks, you would be able to charge only four weeks upfront, which means that in four weeks time you will have to re-invoice the student. There are international transfer fees, it is a greater cost to the student and it is a greater administrative burden; it just seems not to reflect the reality of how an English-language sector operates.[31]

2.42      The approach taken by the bill, English Australia added, is based on the erroneous assumption that ELICOS providers function similarly to universities, which have set 24-week semester dates with a long break in which to attend to the administrative work the proposed changes would create.[32]

2.43      A number of other submitters were similarly opposed to this particular provision. ACPET told the committee that the limitation would 'not be an issue to some providers but to others it would be extremely detrimental.'[33] Furthermore:

While this may be appropriate in many cases, some providers may be adversely affected due to the type of course they offer – given some disciplines, like aviation, high end manufacturing, construction, hospitality, require large capital outlays prior to commencement of a course.[34]

2.44      Those providers who find themselves adversely affected could use assistance to adjust their business models, the committee heard.[35]

2.45      Navitas agreed with English Australia, submitting that the provision was of particular concern for the English language education sector, which has a shorter teaching cycle, no break between teaching cycles and insignificant variations in student outcomes. Given these  factors, Navitas felt that a limit on pre-paid fees would could feasibly:

...encourage student poaching and student churn, further contributing to the current challenging operating environment for ELICOS providers.[36]

2.46      DEEWR acknowledged that the changes would have an impact on a small number of providers, but pointed out that this impact would be minimal and outweighed by the benefits:

Requirements to limit pre-paid fees and place pre-paid fees into designated accounts seek to balance policy objectives related to protecting the interest of students and the sustainability of the tuition protection framework, against what may be considered a reasonable regulatory impost on providers given the significant amounts of money involved. The number of providers impacted by these measures will be minimal given that the requirement to place pre-paid fees into designated accounts will be targeted according to risk and providers in receipt of recurrent government funding will be exempt.[37]

2.47      DEEWR further informed the committee that only seven per cent of students currently pay for more than a semester in pre-paid tuition fees, adding:

Proportionally, this is higher in the English Language Intensive Courses for Overseas Students (ELICOS) and the schools sector. These measures appear to be reasonable in the light of recent experience which has identified serious consequences for students, government and the sector when providers have unsustainable business models heavily reliant on pre-paid fees and do not meet their refund obligations.[38]

2.48      Allowing providers to collect pre-paid fees also:

...encourages poor business practices with some providers starting up with little capital to fall back on should there be a down-turn in enrolments or an increase in visa refusals as recently highlighted.[39]

2.49      DEEWR further pointed out that collecting tuition fees from students on enrolment can involve considerable sums of money and result in reputational damage abroad. Often students enrol in courses before applying for appropriate visas to study in Australia. Money they have paid then has to be refunded if their visa applications are rejected:

For the period June 2010 to May 2011, for example, approximately 14,000 student visa applications offshore were refused and around 2,000 applications were withdrawn. Significantly providers have not met their refund obligations in 43 cases of provider closures between 2008 and 2011. Not only has this impacted on students but it has exacerbated the pressure on the current ESOS Assurance Fund and damaged the reputation of Australia’s education system.[40]

2.50      On top of this, the practice of collecting pre-paid fees can have a negative effect on the quality of courses provided, '...as once all fees are paid the incentive for providers to ensure students continue to be satisfied with the service being provided is reduced.'[41]

Designated accounts

2.51      All but the lowest risk providers will have to keep pre-paid fees in a designated account for the first study period (up to 24 weeks or one semester in length). Designated accounts will:

...protect the initial prepaid fees for students still offshore, including if the provider goes under administration. The designated account will militate against provider practice of using deposits as operating funds. Public providers are exempt from this provision because they have a more reliable funding source.[42]

2.52      The National Union of Students (NUS) wanted to go further, calling for amendments extending the requirement for pre-paid fees to be placed in a designated account:

While the current legislation proposes that all prepaid course fees received by private providers be put into a designated account, it does not address our concerns of non coursework related fees prepaid to Higher Education Providers that are not covered by the proposed Tuition Protection Service.[43]

2.53      Some submissions, such as from the International Education Association of Australia (IEAA), argued that it was unnecessary to place limits on the collection of pre-paid fees as long as fees were required to be kept in designated accounts, believing that the latter would be sufficient to meet the policy intent.[44]

2.54      English Australia strongly argued this point in two submissions, questioning the need to both limit the amount of pre-paid fees that could be collected and introduce the requirement for providers to place fees in a designated account. This, they stated, appeared to be an unnecessary 'duplication of regulation'.[45]

2.55      The committee carefully considered whether limiting the amount of pre-paid fees that could be collected and requiring collected fees to be placed in designated accounts was an unnecessary duplication of regulation. Evidence provided by DEEWR indicated that the department was well aware of the regulatory impost this would be on providers, but made a convincing argument for retaining both provisions:

[T]he two aspects to this measure are intended to be related but complementary and they do address different purposes. They will reduce the refund liability flowing to the tuition protection scheme and will reduce the risks for students, the tuition fund and the government.[46]

2.56      DEEWR further reminded the committee of lessons to be learned from history and experience:

We have taken into account Bruce Baird's comments about designated accounts. He gives some analysis of the history. There is history of this in this country. The past history was that it did not work very well because, when providers collapsed, the money had vanished anyway and providers have found money of direct on those accounts. So, if you read Mr Baird's report, it is not a very happy history. Secondly, Mr Baird had looked into the New Zealand experience, where they have these accounts. He said there were considerable administrative difficulties coming up there which had led to a further development, which was that people were looking for insurance cover to back up those designated accounts.[47]

So what we have gone for is a solution where we are making limited use of designated accounts. We are doing that purely in the case of people who have not commenced. Providers are going up to India and collecting a lot of prepaid money. We hope that this can be policed effectively; we try to put protections around that. We are requiring that money to be put in a designated account so that it cannot be used for the purposes of the current administration of the provider. The purpose is to stop a Ponzi scheme whereby ever-increasing amounts are coming in and the operation is being funded out of that but, at the moment there is a downturn, the entity becomes unviable, as in any Ponzi scheme.[48]

Committee view

2.57      The committee understands the need for both limits on the collection of pre-paid fees and provisions regarding designated accounts. Provider risk is not always predictable, and having designated accounts alone is not a strong guarantee, since providers can default and then disappear along with the contents of their accounts. The committee also understands that limits on the collection of pre-paid fees are necessary to reduce instances of unforseen defaults, thereby easing the pressure by decreasing the number of refunds that have to be issued.

Collecting fees two weeks before study period

2.58      The legislation would also restrict the timing of the payment of fees to no more than two weeks before the commencement of a study period for continuing students.

2.59      Navitas, an education provider operating in seven countries including Australia, expressed particular concern about the lack of certainty the measure would bring about. This, Navitas contended, would pose significant problems for education providers:

Planning and staffing will be compromised severely as providers will not have certainty over student levels until 2 weeks before classes commence. This is an unreasonable situation to place organisations in who have long time lines to manage in securing staff, planning timetables, facilities etc. The overwhelming performance of educational institutions in the past does not support this major constraint on operations.[49]

2.60      Representatives of Universities Australia suggested that a better approach might be to draft a provision preventing providers from requiring students to pay their fees more than two weeks before the commencement of a study period, as a form of 'built-in protection'.[50] This, they argued, would:

...allow students the freedom, flexibility and choice to pay what is a considerable amount of money for a semester at a university ahead of time if they have access to those funds.[51]

2.61      This was echoed by representatives of English Australia, who felt that the way forward could be to regulate against a mandated requirement for early payment while allowing the option of early payment.[52]

2.62      DEEWR explained why a restriction on when payments can be collected was necessary:

Universities and the Independent Schools Council have argued against a restriction on collecting subsequent fees to no more than two weeks before each study period. The purpose of the two-week rule is to prevent providers from getting around the rule that they cannot collect more than 50 per cent of course fees in advance of commencement. If providers were allowed to collect the balance of the course fee at any time after commencement, they could simply ask for the balance the day after commencement.[53]

Committee view

2.63      The committee is aware that putting limits on pre-paid fees and restricting the timing of the payment of fees to two weeks before course commencement is not popular with some providers. The argument for flexibility, that is, allowing students or their parents to pay fees well ahead of time is strong, and many providers and students may benefit from a system whereby fees are allowed, but not required, to be paid early.

2.64      However, the committee is of the view that this approach has a significant drawback. The costs involved with overseas study extend considerably beyond course fees. Once students arrive in Australia, they may easily find that although they have paid their fees, they lack adequate resources to support themselves while they study, leading to unforeseen stress and defaults. Limiting the collection of pre-paid fees is intended to minimise the number of unnecessary student defaults and the creation of high refund liabilities, a central aim of this legislation. For this reason, the committee supports the ESOS amendments as they stand.

Defining study periods

2.65      The legislation further proposes to set the length of each study period by way of a written agreement between students and providers. The length of these study periods would not be able to exceed 24 weeks.

2.66      This proposed amendment caused a degree of consternation among some providers, particularly those in the primary and secondary school sector:

The requirement to set out the length of each “study period” for the course could...be problematic for the school sector, where a “course” could be 5 or more years, and a “study period” might either be a term or a semester.[54]

2.67      The committee heard that the limit was increased from 20 to 24 weeks after consultation and in order to better accommodate short courses.[55] Furthermore, the 24 week limit on study periods was chosen because it is the average length of a semester:

Anything longer than this would significantly dilute the effectiveness of the proposed measure. I note that the closure of a large multi-jurisdictional ELICOS provider due to the business decision of a foreign owner in 2010 affected over 2,000 students, most of whom had paid full fees upfront amounting to a total refund liability of $11 million. If these controls had been in place, this would have significantly reduced the potential refund liability.[56]

2.68      DEEWR explained the intended benefits of limiting the duration of study periods this way:

Provisions for limiting prepaid fees to one study period of no more than 24 weeks and prohibiting fees from being collected until two weeks before the next study period are intended to prevent a provider from taking large amounts of fees upfront, creating high refund viabilities...

...Within the 24-week limit they can define the study period to suit their own course delivery arrangements: a single school term or two terms, one university semester, a single short course or two short courses in one study period.[57]

Strengthening record keeping

2.69      New provisions set out by the ESOS Amendment (Tuition Protection Service and Other Measures) Bill 2011 aim to strengthen record keeping requirements already in place under the ESOS Act. If the bills are passed, the amended ESOS Act will require providers to put in place documented procedures for updating student contact details and maintaining assessment records. This measure will help students in the event of a provider default by ensuring that they can be easily contacted and placed in an alternative course of study as soon as possible.[58]

2.70      Submissions to this inquiry showed varied, but mostly positive, views on these initiatives. The  Independent Schools Council of Australia (ISCA) sought reassurance that new requirements would not result in schools having to duplicate existing record-keeping practices:

Schools are already required under domestic registration and accountability processes to keep extensive and detailed records of student contact information and academic progress. Changes to record keeping requirements should not in any way duplicate existing school practices..[59]

2.71      The Department of Education, Employment and Workplace Relations (DEEWR) informed the committee that these new requirements should not be a burden on most providers, as long as they already keep accurate and comprehensive records.[60] DEEWR also reminded that records were vitally important for students seeking alternative placement following a provider default:

This will help to ensure, in the case of provider default, that students can be easily contacted and placed with another provider in a timely manner.[61]

Committee view

2.72      The committee is of the view that proper record maintenance is of paramount importance in situations where provider defaults force students to seek alternative placement, and supports the proposed measures.

Timelines for implementation

2.73      Clause 2 of the ESOS Legislation Amendment (Tuition Protection Service and Other Measures) Bill 2011 sets out commencement information for provisions within the proposed legislation. With some exceptions, the measures outlined by the bills would commence on the first 1 July following Royal Assent, effectively meaning 1 July 2012.

2.74      Some submissions expressed concern, questioning whether a 1 July 2012 commencement date allows enough time for a proper transition to the new arrangements for providers, and whether it is conducive to the TPS being set up effectively.[62]

2.75      In this vein, submitters such as ISCA suggested pushing the commencement date back by six months, to 1 January 2013.[63] ACPET agreed:

ACPET believes that after the Director is appointed and TPS Advisory Board established, the new structure will need at least six months to establish its operational governance before it will be ready to deal with operational issues. If implementation is rushed and provider closures occur in June–August next year and these are poorly handled by a new and potentially ill-prepared team, there could be further serious damage to the reputation of Australia's already vulnerable international education sector.[64]

2.76      Universities Australia also questioned the wisdom of the proposed commencement date for the TPS, adding:

It is important not to rush the implementation of such an important service and Universities Australia would support a start date of January 2013.[65]

2.77      English Australia did not suggest deferring the commencement date, but pointed to potential reputational damage implementation if the TPS proves premature.[66]

2.78      DEEWR noted these concerns in a supplementary submission, but expressed the view that delaying implementation would prolong the risks associated with current arrangements. These risks include reputational damage, negative impacts on students and '...exposure of Australian taxpayers associated with future college closures.'[67]

2.79      DEEWR was not of the view that providers would be hard-pressed to prepare in time for the changes, and pointed to the later commencement date of the TPS levy:

A 1 July 2012 commencement date for the TPS, depending on the passage of this legislation, provides sufficient time for the sector to prepare for the changes. The Department notes that the major impact for providers in relation to the commencement of the TPS will be in relation to the TPS levy. The levy will not commence until 2013.[68]

2.80      DEEWR further emphasised that the provisions of the legislation would not all take effect immediately:

This is a staggered introduction too, in the sense that, from 1 July, you will have the TPS and related changes, and then the first new levy under the new system will not kick in until 2013. By getting the new system introduced on 1 July, the TPS director will be able to consult the new board in setting the new levy which will kick in in 2013. So it is staggered to that extent. Furthermore, the Baird reforms overall have been staggered. The first set were in a bill that was introduced last year and the next set is in these three bills.[69]

2.81      Finally, DEEWR assured the committee that preparations for implementation had been made:

I have to say we have done everything possible to be ready. The government has asked us to be ready, and so therefore we have worked on every part of this issue that can be done in advance of the legislation—for example, we have been working hard on job descriptions and things like that. Of course, we are not in control of when the legislation passes and it would be presumptive of me to make a comment on that. But on the assumption that there is not anything unforeseeable at the moment about the passage of the legislation, the department will be ready. You have heard views from all of the stakeholders on their own readiness and the readiness of providers, and it is obviously a judgment call. We would hope that we could do everything possible as the department to make things ready for them.[70]

Committee view

2.82      The committee is satisfied that the proposed timeline for commencement of the bills' provisions is realistic and achievable, but urges the government to ensure industry stakeholders are kept adequately informed of progress.

Recommendation 4

2.83      The committee recommends that the Australian Government ensures providers of education services for overseas students are kept up to date in regard to the implementation of the new Tuition Protection Service arrangements.

Conclusion

2.84      The committee carefully weighed the evidence before it, especially on issues which appeared to be of particular concern for submitters.

2.85      One such issue was that of upfront fees. The committee is aware that the issue is of significant concern to some providers, and is cognisant of the fact that some students would quite likely prefer to pay fees upfront. However, there are too many examples of this practice having negative consequences, such as when providers have collected pre-paid fees and then ceased operations, leaving the Australian taxpayer to pick up the bill. Although this obviously does not occur in the majority of cases, the damage done in both a financial and reputational sense is considerable and cannot be overlooked. The committee is of the view that placing limits on the practice of collecting pre-paid fees will ultimately be beneficial for students, and manageable for providers. Although the proposed limitations and requirements may be moderately burdensome on some providers at the outset, in the long run this would bring about a more uniformly high-quality overseas education sector. In turn this would result in a reputational boost abroad that can ultimately only benefit providers and students. The committee considers the short-term impost and inconvenience of adjusting business models worth the substantial long-term benefits for the sector.

2.86      The question of notification periods for student and provider defaults was also of paramount importance for many providers. The committee gave this much consideration, and made two recommendations designed to strike the right balance between giving providers reasonable time to report defaults, and prioritising student welfare. The committee believes it has found a workable balance and urges all parties to work together to ensure requirements are complied with.

2.87      The committee believes the proposed reforms are critical to the future of Australia's overseas education sector, and subject to the foregoing recommendations, supports the passage of the bills.   

Recommendation 5

2.88      The committee recommends that the bills be passed subject to the foregoing recommendations.

Senator Gavin Marshall

Chair

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