3.1
The aim of the Higher Education Loan Program (HELP) is to ensure that the cost of study is not a barrier to students undertaking tertiary education. This is a longstanding enabling policy objective of successive governments which has contributed greatly to the success of Australia's higher education sector:
The Higher Education Loan Program (HELP), and before it the Higher Education Contribution Scheme (HECS), has enabled millions of Australian students to obtain a university qualification without up-front tuition fees. This transformative public policy has contributed to the expansion of the Australian Higher Education system over the last 30 years.
3.2
The Department of Education and Training (the department) emphasised this point, submitting that without HELP 'it is inconceivable that growth in the higher education sector in recent years could have been achieved'. In 2017, 622 313 places were funded at higher education institutions, an increase of 153 239 places since 2009.
3.3
The cost of the administration of HELP by the department is currently borne by taxpayers. The proposed cost recovery measures are designed to link 'the cost of services to those who benefit from them'.
3.4
This chapter sets out the government's rationale for the Higher Education Support (Charges) Bill 2018 and Higher Education Support Amendment (Cost Recovery) Bill 2018 (the bills), and looks at several issues raised in submissions.
3.5
This chapter is structured according to the following topics:
Basis for introducing cost recovery;
Charging based on number of enrolments;
Details of the annual charge;
Consultation with the higher education sector;
Commencement date of annual charge;
Basis for introducing cost recovery
3.6
In introducing the measures, the Minister for Education, the Hon. Dan Tehan MP, explained the government's rationale for implementing cost recovery for HELP:
The HELP cost recovery measures are consistent with the Australian Government Charging Framework and link the cost of services to those who benefit from them.
In this case, the higher education providers will be required to meet the cost for the regulatory arrangements from revenues they raise from students.
Currently these costs are borne by the general public...
3.7
The department submitted that higher education providers benefit from 'having access to the Commonwealth Government balance sheet to provide low cost, income contingent student loans on terms that would not be available under any commercial financing arrangement'. Further, the department submitted that providers benefit from HELP as it is a 'central element of the arrangements that support a well-resourced and growing sector'.
3.8
The proposed annual charge is the main vehicle for delivering cost recovery, with the application fee recovering a much smaller amount, as set out in Chapter 1. Accordingly, most submissions focussed on the annual charge. The application fee is separately discussed later in this chapter.
The annual charge
3.9
As outlined in Chapter 2, the proposed annual charge would partially recover the costs of HELP's administration. As could be expected, stakeholders were more supportive of partial rather than full cost recovery. For example, Universities Australia noted that partial cost recovery 'takes into consideration the significant economic contributions that the university sector and its graduates make to society as a whole'.
3.10
The Avondale College of Higher Education shared this view:
We consider that it is reasonable for the Government to recover the costs of administering the HELP schemes. However, we maintain that the Government itself (through appropriate allocations) should also contribute a share to the cost of administering and regulating the higher education sector. After all, the higher education sector itself makes a substantial contribution to the Australian economy as a major employer and through the highly valuable education export industry.
3.11
A number of stakeholders expressed conditional support for the proposed annual charge. For example, The College of Law indicated its support for 'any reasonable initiative to enhance the sustainability of the HELP system'.
3.12
Some stakeholders including the Group of Eight and Universities Australia queried whether higher education providers should pay for the administration of HELP. These stakeholders emphasised that the costs of administering HELP are already shared by the higher education sector and government. The University of Newcastle submitted that, 'like other universities, [it provides] a range of administrative and student services' to ensure that HELP funding is properly administered. Indeed, universities and other providers act as a delegate of the Secretary of the Department of Education and Training in considering requests for remission of HELP.
3.13
The University of Melbourne endorsed the positions of the Group of Eight and Universities Australia, arguing:
The principle of asking universities to meet the costs of Government administration is an unfortunate precedent and one which should be, at the very least, interrogated, particularly given the constraints placed by Government on universities' capacity to raise revenue.
3.14
Public universities, who receive a large proportion of their revenue from the government, expressed the greatest concern about the annual charge. A particular concern for public universities was whether they would be able to raise funds from domestic students to pay the charge. The University of Canberra submitted that as a Table A provider, the maximum fees it can charge students are set by government. Similarly, the Group of Eight considered that public universities would not have the power to charge students to recoup the costs of the annual charge. Accordingly, it is expected that public universities would need to absorb the costs, rather than passing them on.
3.15
The University of Melbourne was similarly concerned that the proposed arrangements would mean the government would be effectively taking back part of the financial allocation made to universities:
Since public universities are prohibited by law from charging tuition fees to their domestic students, the apparent suggestion is that universities return a portion of the funding received for student education in the form of a tax.
3.16
Some submitters considered that any cost recovery for the administration of HELP should be directed to students rather than providers. For example, the Grattan Institute asserted that students, rather than providers, are the main beneficiaries of HELP and therefore 'a student charge added to their HELP loan may more closely match the cost recovery policy'. The University of Canberra similarly concluded that 'while the University of Canberra does not endorse it, a loan fee would be more appropriate than a tax on universities'.
Committee view
3.17
The committee notes the various views expressed regarding the annual charge. The committee further notes that there are a number of efficiencies that may be gained from implementing cost recovery. Firstly, the government has indicated that 'cost recovery will encourage higher education providers to offer more comprehensive information for students to reduce the volume of enquiry services required by the department'. The committee understands that the department tracks the number of queries it receives, making it possible to determine the level of reduced demand under the new measures.
3.18
Secondly, the committee notes the department's view that the proposed measures can 'increase the efficiency, productivity and responsiveness by the department, as service levels can be streamlined where possible'. The government provided further explanation on this point:
Charging for regulatory activities could promote efficiency, in potentially reducing the number of compliance issues identified by the department's desktop audits. It is anticipated that providers would improve their compliance with HELP policy and legislation, which would allow the department to conduct faster and fewer investigations and audits, and therefore reduce the cost to providers.
3.19
Furthermore, as similar charging measures already exist for tertiary education sector regulators and for student loans in the vocational education and training sector, the proposed HELP cost recovery measures 'will ensure consistency and fairness across the whole of the tertiary education sector'.
Impact on providers
3.20
There were some concerns that partial cost recovery would adversely impact higher education providers, including in relation to students, research and the international education sector. The University of Melbourne considered that the measures would divert funds that could otherwise be used for teaching. In relation to the impact on the international education sector, Science and Technology Australia contended that there was a potential for universities to 'over-rely on international fee-paying students to cross-subsidise the cost of domestic student education' which could contribute to a 'market concentration risk'.
3.21
Additionally, the Regional Universities Network argued that the annual charge would divert funding from activities undertaken by regional universities that contribute to the economic, social and cultural development of regional Australia. There was also a concern that the proposed measures impose an additional compliance burden on higher education providers.
3.22
However, these regulatory costs are currently borne by taxpayers. The committee notes that providers can meet these costs from the revenues they raise from students, or other sources. The annual charge, representing only partial cost recovery, is also a relatively small impost on providers. As noted in Chapter 1, the annual charge is expected to be $13.8 million over the period 2019-20 to 2021-22. When this figure is dispersed across the 40 odd institutions in Australia's higher education sector, the department estimates that the annual charge will not exceed $97 000 per provider. In contrast, in 2017 the operating revenue for the University of Sydney was $2.346 billion and the Australian National University's was $1.226 billion. The committee notes that when viewed in the context of the large budgets of most higher education providers, the annual charge is unlikely to have a material impact.
3.23
Some stakeholders acknowledged that the total charge was relatively small. For example, the University of Newcastle considered that 'the total amount charged per year is not considerable in the context of the University's total budget'.
3.24
The Council of Australian Postgraduate Associations concurred that the charge was not considerable:
…the charge will initially be small in comparison to providers' total budgets. It has therefore not been subject to the same level of criticism as other recent changes to higher education funding.
3.25
The potential impact on students is considered separately below.
Committee view
3.26
The committee notes the concerns raised regarding the potential financial impact of the proposed cost recovery measures on higher education providers. However, in the context of the typical revenues available to the higher education sector, the committee considers that the charges will not materially impact the overall budgets of providers.
Impact on students
3.27
As noted above, there were some concerns that partial cost recovery would impact negatively on tertiary students. Some stakeholders considered that the proposed annual charge could divert funds from other university activities and programs and/or increase costs for students.
3.28
For example, Navitas expressed in-principle support for the bills, but considered that:
Any additional cost imposed on higher education providers shifts money away from investment in quality student experiences and outcomes. This cost also has potential to be passed on to students depending on the approach of the education provider.
3.29
Some stakeholders argued that partial cost recovery would unfairly penalise students of private providers, who may have no option but to pass on the charges to students. Navitas asserted that students of independent providers are already disadvantaged by the FEE-HELP 25 per cent loan fee and lack of access to Commonwealth Supported Places. In this regard, Avondale College of Higher Education submitted that imposing 'the same levy on both public and independent institutions is to exacerbate the present inequities placed on students in independent providers'.
3.30
However, the government has indicated that the method for calculating the annual charge will take into account the size of a provider, by including a per‑student component.
Committee view
3.31
Given the relatively small quantum of the annual charge, particularly once it is distributed across the broader higher education sector, the committee considers that the overall impact of the annual charge on students, including equity outcomes, will be minimal. Furthermore, as the charge is being introduced across the board, it not expected to disproportionately disadvantage students of independent providers.
Charging based on number of enrolments
3.32
The proposed annual charge includes a 'per student' component, which is based on the number of students enrolled with a provider. Stakeholders supported this approach over broad-banded categories, which can disadvantage providers with enrolments at the lower end of a band. In this regard, the Council of Private Higher Education stated that it 'welcomes the intention of the charging regime to fairly reflect the relative size of institutions through basing the charge on enrolment numbers'. However, the Council of Private Higher Education cautioned that consideration should be given to institutions which enrol international and up-front full-fee-paying students as these cohorts 'place no demand on HELP schemes':
Using the definition of student as defined by the HESA would result in application of the per student HELP charges to all enrolled students. COPHE members enrol international and domestic up-front fee-paying students who place no demand on HELP schemes. These student enrolments should not be included in the calculation of per student charges levied to administer the HELP schemes.
3.33
The Higher Education Support (Charges) Bill 2018 (Charges Bill) does not address this issue, as it states that the method and amount of the annual charge is to be prescribed by the regulations. However, the department has since clarified that the annual charge will be based on HECS-HELP and/or FEE-HELP student numbers.
Details of the annual charge
3.34
The administrative details for the collection and recovery of the proposed annual charge will be set out in the Higher Education Provider Guidelines 2012. These details will include when assessment notices will be given to providers, whether there are penalties associated with late payment of the charge, and when and how extensions of time to pay the charge can be given.
3.35
A lack of information concerning the annual provider charge was of concern to some submitters. For example, the National Tertiary Education Union sought further clarity on what the specific costs of the charge would be.
3.36
Since the introduction of the bills into Parliament, the department has provided additional information about how the annual charge would be implemented in a draft Cost Recovery Implementation Statement (Implementation Statement). The Implementation Statement was released for consultation on 31 October 2018, which has impacted the ability of stakeholders to take into account the Implementation Statement when they provided a submission.
3.37
The Implementation Statement explains that the proposed annual charge will introduce partial cost recovery for the department's 'ongoing compliance and monitoring' activities, including:
financial viability checks;
reviews of provider websites for policy standards and information for students;
responses to queries and complaints; and
ongoing provider and student management.
3.38
Based on historical data, the department expects to handle, on average, 6000 enquiries per annum. The annual charge estimate for each of the activity outputs is set out below in Table 3.1.
3.39
The Implementation Statement also explains that the annual charge will comprise of:
A student-based amount, 'representing costs that are incurred in greater proportion for providers with more students, such as communications, enquiries and stakeholder engagement'.
A student-based amount for non-university higher education providers (NUHEPs) and Table C providers, 'related to provider management activities such as provider training, working groups, system support and legal support, investigations and audits representing costs that are incurred in a greater proportion for non-university higher education providers and Table C providers with more students'.
A risk-based element, 'representing costs incurred according to the risks represented by the provider'.
University specific costs 'allocated on a flat rate basis. These costs are in relation to provider management, financial viability checks and compliance'.
3.40
The Implementation Statement also indicates that the 'government has currently determined that the costs of administering payments, general administration and compliance will not be recovered from providers'.
Amount of the charge
3.41
The amount of the annual charge will be set by regulation. The Implementation Statement outlines that For Table A and B universities, the annual charge is expected to be:
a flat charge on every university ($26 207); and
a charge of $1.82 for every 'registered student'.
3.42
For non-university providers and Table C universities, there will be an additional per-student charge of an estimated $13.18 to cover additional 'provider management and compliance'. The institution charge is estimated to be between $544 and $2719, scaled on the basis of regulatory risk. The department's charge estimates are set out in Table 3.1 below.
Table 3.1: —Annual charge for approved higher education providers
|
|
|
|
|
|
Stakeholder engagement and enquiries
|
$1.63m
|
Number of students registered with a provider
|
$1.82 per registered student for the provider
|
|
NUHEPs and Table C provider management and compliance
|
$0.65m
|
Number of students registered with a NUHEP/Table C provider
|
$13.18 per registered student at the NUHEP/Table C provider
|
|
NUHEPs and Table C providers financial viability
|
$0.15m
|
Risk assessment and risk management of providers: high/not assessed yet, medium, low
|
NUHEP/Table C provider specific:
Low: $544
Medium: $1631
High (or not assessed yet): $2719
|
|
University provider management, compliance and financial viability
|
$1.10m
|
Delivered equally across all universities
|
$26 207 per university
|
Source: Department of Education and Training, Cost Recovery Implementation Statement, Cost recovery activities for HECS-HELP and Fee-HELP programs, Financial Year 2018-19, 31 October 2018, p. 14.
3.43
The department has indicated that the total amount of the annual charge is estimated to be between $558 and $97 000 per provider.
3.44
Some stakeholders were concerned that the amount of the charge had not been set and could increase substantially in the future. For example, the University of Newcastle noted that the amount of the annual charge could 'at least theoretically' change significantly without consultation or Parliamentary consideration. Universities Australia shared these concerns and proposed a 'cap' or 'limit' on the charges.
3.45
However, the government has indicated that setting the annual charge via regulation is essential to ensuring that there is sufficient flexibility for the Commonwealth to accurately recover the costs of administration of HELP, as those costs increase or decrease over time. The Implementation Statement also notes that the department will review the cost drivers for the application activity and ongoing monitoring, compliance and management activities on an ongoing basis. This will 'ensure that the application fee and annual charge rates reflect the efficient costs, the drivers of those costs and will include consultation with stakeholders'.
3.46
Furthermore, the Charges Bill includes a safeguard against excessive charges: the Minister must be satisfied that the effect of the regulations will be to recover no more than the Commonwealth's likely costs in connection with the administration of the Higher Education Support Act 2003 (HESA). The department advised that it considers this requirement is a sufficient restriction on the amount that can be charged.
Scope of the charge
3.47
There was some concern that the bills do not sufficiently limit the scope of the activities subject to partial cost recovery. The Explanatory Memorandum for the Charges Bill indicates that the annual charge is intended to recover costs associated with data collection and analysis. However, the Group of Eight argued that these activities are geared towards government policy processes:
The data collection and analysis used through the Higher Education Data Collection is fundamental to a range of policies and programs managed by universities and the Government. This includes the work the Department is currently undertaking in respect of the Government's policy to implement performance contingent funding for universities.
3.48
The Implementation Statement notes that as part of ongoing compliance with HESA, 'all providers must supply the department with statistical information and other data, such as student enrolment and course information, to continue as an approved provider under HESA'. The Implementation Statement addresses the above concern, explaining that for the purposes of partial cost recovery, 'in-scope activities are related only to the provision of HECS-HELP and FEE-HELP loans'.
3.49
The Group of Eight was also concerned that the bills would allow the government to 'charge for activities that are unrelated to the administration of the HECS-HELP and FEE-HELP schemes', such as activities undertaken by the Tertiary Education and Quality Standards Agency (TEQSA). The Group of Eight noted that administrative activities undertaken by TEQSA in respect of HESA are already subject to cost recovery arrangements.
3.50
Additionally, the Group of Eight was concerned about the potential for universities to be charged for costs specific to the regulation of non-university providers, such as the costs of financial viability checks. Equally, the Group of Eight submitted that universities should not be required to meet the costs of the annual higher education provider workshops, which have previously included sessions on tuition assurance obligations (which do not apply to Table A providers).
3.51
Universities Australia expressed the following concern regarding the scope of the charge:
…clause 7 of Higher Education Support (Charges) Bill 2018 is drafted in such a way that it would not prevent a future Minister from expanding the charges levied under it from a partial cost recovery to a full cost recovery basis.
3.52
The National Tertiary Education Union was concerned that the drafting of the Charges Bill could allow cost recovery for the administration of the whole Act:
The administration of the Higher Education Support Act (HESA) (2003) goes well beyond the costs associated with the operation of HELP. Section 19 of HESA (2003) outlines the quality and accountability requirements which include financial viability, fairness, the need to enter into funding compacts and academic freedom. While many of these requirements are no doubt captured by TEQSA standards and therefore included within its registration and re-registration processes, these are nonetheless costs incurred by the Commonwealth which from our reading could potentially be captured by this clause.
Committee view
3.53
The committee acknowledges the concerns raised during the inquiry regarding the scope of the charge. The phrasing in the Charges Bill appears to be somewhat broader than that contained in the Explanatory Memorandum which suggests that the annual charge is intended to enable partial cost recovery for the administration of HELP, not for the purposes of recovering the costs of administering the whole Act.
3.54
In response to a question on notice, the department has since confirmed that the proposed cost recovery measures 'will partially recover the estimated regulatory and compliance costs of administering the HECS-HELP and FEE‑HELP programs only'. The department has also confirmed that the costs of administering OS-HELP and SA-HELP are excluded from the annual charge.
Consultation with the higher education sector
3.55
Submitters noted that there was no consultation with the higher education sector prior to the introduction of the bills into Parliament. The Council of Private Higher Education submitted that stakeholder consultation on the development of the charging framework and ongoing performance measurement of the HELP schemes should be required.
3.56
However, since the bills were introduced, the department released the Implementation Statement for consultation with the higher education sector, with comments due by 23 November 2018. This gives stakeholders the opportunity to submit feedback on the cost recovery measures, including the method and amount of the cost recovery charges, prior to the bills being debated in Parliament.
3.57
The department has indicated that after the consultation period concludes, the finalised Implementation Statement is expected to be approved by the Education Minister and the Minister for Finance, the Hon. Mathias Cormann. The Implementation Statement would then be published on the department's website.
3.58
The department has also committed to ongoing stakeholder engagement on the cost recovery charges in early 2019. The Implementation Statement indicates that stakeholders will be consulted on the charging measures 'on an ongoing basis, including on specific operational matters on a case-by-case basis'.
Commencement date of annual charge
3.59
Another issue raised relates to the proposed commencement of the annual charge. As noted in Chapter 2, the annual charge would commence from 1 January 2019, and higher education providers would receive their invoice for the charge for the 2019 calendar year in 2020, after reconciliation of higher education providers' HECS-HELP and FEE-HELP student enrolment data has occurred.
3.60
Although the government has articulated the timeframes for the annual charge, some stakeholders were concerned that insufficient time had been allocated to higher education providers to ensure a smooth transition. For example, the Council of Private Higher Education submitted that delaying the commencement of the charging regime until 2020 enrolments would be less disruptive, as 'providers have already developed business plans and operational budgets for 2019'.
3.61
The Council of Private Higher Education further submitted:
Amending the implementation to 2020 enrolments will also provide greater transparency for students and better enable providers to publish their student fees in accordance with the requirements of the Higher Education Provider Guidelines.
Committee view
3.62
The committee notes that the financial impacts of the measure will be experienced by providers a year after the costs are initially incurred by the department. The financial impact in subsequent years will also be delayed by 12 months, allowing each institution sufficient time to determine the funding mechanism that best suits its individual circumstances. Accordingly, the committee considers that the proposed commencement date is reasonable.
Application fee
3.63
As noted in Chapter 1, the proposed fee for applications for approval as a FEE‑HELP higher education provider under HESA is expected to deliver a saving of $0.3 million over the forward estimates (2019-20 to 2021-22).
3.64
The proposed application fee was of less concern to submitters. Indeed, the proposed fee would impact a smaller number of stakeholders and would not impact providers that are already approved under HESA. For instance, Universities Australia noted that they were less concerned with the application fee because their members already have access to FEE-HELP.
3.65
The Implementation Statement indicates that the application fee is expected to be $12 926 per application. This fee is 'fully reflective of the costs of delivering this activity' and overall represents a small impost. Although the Grattan Institute did not support the fee, it acknowledged that the fee was 'not likely to significantly undermine the policy goal of ensuring that domestic students do not need to pay upfront fees'.
Committee view
3.66
Given its low level and limited coverage, the committee considers that the application fee will not significantly impact providers seeking approval as a FEE-HELP higher education provider under the Act.
Expected total revenue
3.67
There was some confusion from stakeholders as to the expected total revenue for the proposed cost recovery measures.
3.68
As outlined in Chapter 1, the 2018 Budget papers report that the government expected to raise $30.7 million over the forward estimates from the annual charge and the application fee. The figure was revised down to $14.1 million over the forward estimates in the Explanatory Memorandum. This figure has been further refined in the Implementation Statement to $11.3 million. The department explained that the figures have changed because of 'additional analysis undertaken by the department of the activities and costs associated with the administration of the loan program'.
Overall committee view
3.69
The committee acknowledges that the proposal to introduce an annual charge on all higher education providers whose students are entitled to HECS-HELP assistance or FEE-HELP assistance provoked a mixed response, most notably due to the lack of detail on the charge, and also due to concerns about the potential impact on providers and students.
3.70
The committee notes that the amount of the charge, which would be prescribed by regulation, would represent partial cost recovery and would be commensurate with the size of the provider. The committee also notes that the proposed measures are similar to existing charges that apply in the tertiary education sector for regulators and for student loans in the vocational education and training sector.
3.71
The committee considers that the levying of a charge on all higher education providers whose students are entitled to HECS-HELP assistance or FEE-HELP assistance is an appropriate option to recoup for taxpayers some of the costs incurred in administering HELP.
3.72
The committee notes that the department's Implementation Statement is currently in the consultative period with the higher education sector. While this does not prevent the Bill from passing, the committee encourages the department to continue consulting with key stakeholders to ensure the final implementation is fair and equitable.
3.73
The committee recommends that the Senate pass the bills.
Senator Slade Brockman
Chair