2.1
This chapter sets out the purpose of, and measures proposed by the Higher Education Support (Charges) Bill 2018 (the Charges Bill) and the Higher Education Support Amendment (Cost Recovery) Bill 2018 (the Cost Recovery Bill).
Purpose of the bills
2.2
The purpose of the bills is to implement cost recovery for the administration of the HECS-HELP and FEE-HELP programs. In introducing the bills to the House of Representatives on 19 September 2018, the Minister for Education, the Hon. Dan Tehan MP (the minister), stated that the Higher Education Loan Program (HELP) cost recovery measures 'will ensure consistency and fairness across the whole of the tertiary education sector, as similar charging measures already exist in the vocational education and training sector'.
2.3
The Charges Bill seeks to introduce an annual charge on all higher education providers whose students are entitled to HECS-HELP assistance or FEE-HELP assistance. In introducing the Charges Bill, the minister explained the purpose of the annual charge:
The annual charge will partially recover the costs incurred by the Commonwealth each year in administering the HECS-HELP and FEE‑HELP programs from higher education providers.
2.4
The annual charge is also intended to partially recoup the costs incurred by the Commonwealth in relation to data collection and analysis as well as compliance activities.
2.5
The Cost Recovery Bill would implement an application fee for registered higher education providers that apply for approval as a higher education provider to offer FEE‑HELP. The fee would fully recover the costs of administration and assessment of applications from prospective FEE-HELP providers. Further information on the purpose and details of the application fee is set out towards the end of this chapter.
Background
2.6
On 8 May 2018, the government announced two HELP charging measures as part of the 2018-19 Federal Budget. These measures would require higher education providers, who utilize Commonwealth funding, to contribute to the maintenance and operation of HELP arrangements. The proposed charging measures would involve:
an annual charge on all higher education providers whose students are entitled to HECS-HELP and/or FEE-HELP assistance, to partially recover the costs incurred by the Commonwealth in administering the HECS-HELP and FEE-HELP programs; and
an application fee for registered higher education providers seeking approval as a higher education provider under the Higher Education Support Act 2003 (HESA or the Act) to offer FEE-HELP, in order to recover the Commonwealth's full costs of administering and assessing applications.
2.7
The bills seek to implement the government's commitment to introduce partial HELP cost recovery measures in the higher education sector. Higher education providers would be required to meet the cost for the regulatory arrangements from revenues they raise. The minister has noted that proposed cost recovery measures are consistent with the Australian Government Charging Framework (the Charging Framework).
Australian Government Charging Framework
2.8
Cost recovery involves government entities charging individuals or non‑government organisations some or all of the efficient costs of a regulatory activity. The Charging Framework, which incorporates the Cost Recovery Guidelines, encourages a common approach to planning, implementing and reviewing government charging.
2.9
In accordance with the Charging Framework, the Department of Education and Training (the department) released a draft Cost Recovery Implementation Statement (Implementation Statement) for consultation on 31 October 2018. The Implementation Statement provides information to higher education stakeholders about how the department plans to implement the measures. The proposed fee structure set out in the Implementation Statement is discussed in Chapter 3.
Commonwealth higher education funding
2.10
HESA provides the framework for Commonwealth funding for higher education institutions. The Act covers major higher education funding programs, including HELP loans to students, the Commonwealth Grant Scheme (which subsidises tuition costs for Commonwealth supported places), research grants, and other grants such as funding for equity programs.
2.11
Providers must meet quality and accountability requirements, including in relation to financial viability, to maintain their status as an approved higher education provider under HESA.
2.12
Access to Commonwealth funding is restricted according to provider classification arrangements established under HESA. The Act sets out three categories of providers based on tables contained in the Act, with the major of Australian higher education providers being 'Table A providers':
Australian public universities (Table A providers) have access to all government grants under the Act, and their eligible students can access all HELP loans.
Universities listed in Table B can access some government grants, and their eligible students can access FEE-HELP, and in some cases HECS-HELP.
Universities listed in Table C and other approved non-university higher education providers are not eligible for government grants under the Act, but their students can access FEE-HELP.
The Higher Education Loan Program
2.13
HELP comprises five student loan schemes which allow eligible students to defer the cost of approved tertiary education courses at approved providers. When a student accesses HELP, the government pays the student's contribution amount of their tuition fees directly to the provider. HELP loans are repaid through the Australian Taxation Office when the debtor's income exceeds the minimum repayment threshold. The schemes are:
HECS-HELP—available for Commonwealth supported higher education students (typically domestic undergraduate students studying at Australian public universities) to pay their student contribution amounts;
FEE-HELP—available for domestic full-fee-paying higher education students to pay course fees up to a lifetime borrowing limit;
VET Student Loans—replaced VET FEE-HELP and is available to Vocational Education and Training (VET) students studying an approved course at an approved training provider, to pay their course costs;
OS-HELP—available for eligible Commonwealth-supported higher education students undertaking part of their course overseas; and
SA-HELP—available to students wishing to defer payment of the student services and amenities fee, which providers charge for non-academic student services and amenities.
2.14
The department noted that it 'regulates higher education providers that can offer courses under HECS-HELP and FEE-HELP, to ensure that providers are financially viable, making available required information to current and prospective students and complying with reporting obligations and legislative requirements'. The department further explained that the administration of HELP comprises two regulatory activities:
Applications from registered higher education providers (as defined by the Tertiary Education Quality and Standards Agency Act 2011) to be approved under HESA to offer FEE-HELP assistance to eligible students; and
Ongoing regulatory activities such as compliance and auditing costs, payments and estimates, processing and actioning complaints, and provider and student management. These activities ensure that approved higher education providers continue to meet their requirements as a higher education provider under HESA.
2.15
Cost recovery arrangements are currently in place for VET Student Loans, including an application fee and a provider charge levied on approved providers as a tax. These charges are set in regulations.
2.16
No cost recovery charges for HELP currently apply to higher education providers. However an administrative charge is currently in place for full‑fee‑paying students: a 25 per cent loan fee paid by some undergraduates accessing FEE-HELP. The purpose of the loan fee is to recover some of the costs of financing the scheme:
The loan fee is designed to compensate the Commonwealth for the cost of lending amounts that can be significantly higher than those loaned to Commonwealth supported students and therefore may take significantly longer to be repaid.
2.17
In contrast to the FEE-HELP loan fee, the charges proposed in the bills seek to recover some of the regulatory costs of the HELP scheme.
Overview of the higher education provider charge
Commencement date
2.18
The introduction of the provider charge would commence on 1 January 2019. However, the Second Reading Speech indicates that higher education providers would receive their invoice for the annual charge for the 2019 calendar year in 2020, after reconciliation of providers' HECS-HELP and FEE‑HELP student enrolment data has occurred. The Cost Recovery Bill Explanatory Memorandum further notes that verification of student enrolment data for a calendar year usually occurs around mid-May in the following year.
Amount of higher education provider charge
2.19
The Charges Bill provides that the amount of the provider charge for a year is the amount (including a nil amount) prescribed by the regulations for that year; or worked out for that year in accordance with a method prescribed by the regulations.
2.20
The Explanatory Memorandum for the Charges Bill states that setting the amount of the charge via regulation provides necessary flexibility, which would 'ensure that the Commonwealth recovers the likely costs of administration of HELP, as the cost of administration increases or decreases'.
2.21
Furthermore, the Charges Bill provides that before the Governor-General makes regulations for the purposes of determining the amount of the charge, the Minister must be satisfied that the effect of those regulations will be to recover no more than the Commonwealth's likely costs in connection with the administration of the HESA.
2.22
The Charges Bill would also allow the regulations to provide for indexation of amounts specified in the regulations.
2.23
The Explanatory Memorandum clarifies that prior to the introduction of regulations, a fees schedule would be determined (consistent with the Cost Recovery Guidelines) and documented in the Implementation Statement.
Exemptions from higher education provider charge
2.24
The Charges Bill would enable the regulations to provide for exemptions for higher education providers from having to pay the higher education provider charge. The Explanatory Memorandum does not provide further guidance on how exemptions from the charge would apply.
Regulations
2.25
The Charges Bill includes a standard regulation making power, allowing the Governor‑General to make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Administration of the higher education provider charge
2.26
The Cost Recovery Bill contains enabling provisions which would allow the department to administer the annual charge introduced by the Charges Bill.
2.27
The Cost Recovery Bill would require higher education providers to pay the annual charge introduced by the Charges Bill as an ongoing requirement of the approval under HESA. The Explanatory Memorandum for the Cost Recovery Bill states that the government anticipates that the amount of the annual charge would differ depending on the size of the provider, recognising the impost of such a charge on smaller providers. The government's proposed method of calculating the charge is discussed in Chapter 3.
2.28
Subdivision 19-E of HESA sets out the existing compliance requirements for higher education providers. The basic requirements include that providers must comply with the Act and regulations, the Higher Education Provider Guidelines, and any condition imposed on the provider's approval as a higher education provider.
2.29
The Cost Recovery Bill would insert a new requirement for higher education providers to pay the charge, and any penalty for late payment of the charge, when it is due and payable.
2.30
A failure by a provider to pay the charge (or a late payment penalty) would constitute a breach by the provider of the quality and accountability requirements of HESA, for which the Minister can take action. The Explanatory Memorandum does not provide further guidance on action the Minister may take.
2.31
The Explanatory Memorandum indicates that providers would have 30 days from the date of the issued invoice to pay the charge.
Higher Education Provider Guidelines
2.32
The Cost Recovery Bill also provides that the Higher Education Provider Guidelines may provide for all or any of the following matters:
the issuing of notices setting out the amount of the higher education provider charge payable by a provider;
when the higher education provider charge is due and payable;
the issuing of notices extending the time for payment of the higher education provider charge;
penalties for late payment of the higher education provider charge;
to whom the higher education provider charge and any penalties for late payment are payable;
the refund, remittal or waiver of the higher education provider charge or a late payment penalty;
the review of decisions made under the Higher Education Provider Guidelines in relation to the collection or recovery of the higher education provider charge; and
any other matters relating to the collection and recovery of the higher education provider charge.
Overview of the higher education provider application fee
2.33
The Cost Recovery Bill implements an application fee for registered higher education providers that apply for approval as a higher education provider to offer FEE‑HELP (payable upon submission of an application for assessment).
2.34
The Explanatory Memorandum for the Cost Recovery Bill explains that the purpose of the application fee is:
…to fund the FEE-HELP provider application process, including the costs of administration and assessment of the applications from prospective providers seeking approval as a higher education provider under HESA.
2.35
The Explanatory Memorandum further states that the application fee would be set at a level that will recover the government's full costs of administration and assessment of applications from prospective FEE-HELP providers.
2.36
The Act sets out the existing requirements for applications for approval as a FEE-HELP provider. Currently, applications for approval must be in a form approved by the minister, and accompanied by such information as the minister requests. The Cost Recovery Bill would amend the Act to require an application for approval to be accompanied by the fee that would be prescribed by, or worked out in accordance with the method prescribed by, the Higher Education Provider Guidelines.