Insights Blog

Avoiding regulatory responsibility and its impact on student loan programs

Avoiding regulatory responsibility and its impact on student loan programs

14 June 2017, by Mark Warburton

Download full paper (PDF)

The Minister for Education and Training, Senator Simon Birmingham, has announced reforms to stop “dodgy providers ... from infecting the higher education and international sectors”. The Education Legislation Amendment (Provider Integrity and Other Measures) Bill 2017 (the Bill) was introduced to Parliament on 1 June 2017.

The challenges in managing student loan programs and tertiary education regulation have never been about a single scheme expanded at one point in time by a particular Government. They are about the systemic arrangements that have been evolving for well over a decade under various governments. In the past, insufficient attention was paid to ensuring that the totality of ‘administrative’ arrangements was effectively functioning to manage risk. The consequences of that failure became evident in VET, but higher education has had similar problems.

The changes in the new Bill will affect many higher education providers, but are not intended to affect public universities. It gives the Minister a significant new power to restrict the availability of FEE-HELP in the higher education sector. It changes FEE HELP eligibility criteria and seeks to protect it from the sorts of fraud committed by VET providers under the VET FEE-HELP scheme, in particular the potential inappropriate use of Tax File Numbers supplied by the ATO.

Civil penalties are being attached to many of the existing ‘Quality and Accountability Requirements’ which are in the Act providing for the student loans administered by the Department of Education and Training (DET). New provisions with civil penalties are also being introduced. These requirements have rarely been used, as was originally intended, to remove providers that did not comply with them and to protect students.

The VET FEE-HELP debacle was largely about a lack of preparedness to take action based on existing regulatory powers and confusion about the responsibilities of the various agencies. The ‘problem’ will only be fixed when there is effective implementation of regulation and each agency involved actively performs its role. Attaching civil penalties to existing provisions is not a solution for the absence of enforcement activity. Whatever is done to the provisions, someone has to enforce them or they will be ineffective.

The Government’s response to the VET FEE-HELP debacle is having major ramifications across the tertiary education sector. Fundamental changes are being made to student entitlement programs which reduce the effectiveness of those programs in supporting students who are in the tertiary education sector. VET providers are going into liquidation and large numbers of students are being ‘left stranded’, placing tuition assurance schemes under severe stain.

Legislation is proliferating civil penalty provisions and creating a potential profusion of red tape. It has the appearance of being the solution but it requires DET to significantly increase its monitoring and its preparedness to take compliance action to safeguard HELP programs. There is no reason to believe that DET will be more active in enforcing the Quality and Accountability Requirements of providers than it has in the past. It may be a façade.

The real solution being offered actually may be a tightening and restriction of student loan programs. It is a potentially easier solution for DET to deliver. Unfortunately, it may be a solution detrimental to the long-term interests of our tertiary education sector and to the students who lose access to loan programs in the process.

Do we really want a tertiary education sector bifurcated into ‘trustworthy’ education providers whose students can access government assistance and marginal providers where domestic, as well as international students, are required to pay full fee fees upfront for their courses and do so in an environment in which there is inadequate enforcement of regulatory protections?

Mark Warburton is Honorary Senior Fellow of the LH Martin Institute and a former Principal Analyst for Universities Australia.

Download full paper (PDF)

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June 16th, 2017 at 12:06pm
Geoff Sharrock
Mark, thanks for this analysis. One point I am not clear about is whether or how the new provisions apply to public universities. A report in The Australian earlier this week (14 June) suggested that one claim in the paper on this aspect - the extent of application -
has been retracted. I have downloaded and read the full paper (listed as revised at the weblink). However I am not sure what has been revised, or whether the paper currently on the website is a pre- or post-retraction version.
June 16th, 2017 at 2:27pm
Mark Warburton
The paper on the website was slightly modified and is now current. The proposed new eligibility requirements for FEE-HELP and the additional quality measures apply only to unlisted providers. I retracted the claim that these applied to universities.

I don't think that students should have less entitlement to assistance because they are undertaking higher education at a TAFE or private provider. I don't see why the proposed regulatory requirements to protect students should not also apply to universities.

I support the intention underlying these changes but think that the particular approach adds too much complexity to the framework for higher education provision.

I did not retract the claim that a Minister can restrict the availability of FEE-HELP at any provider, including a university. The Department has confirmed that this provision technically can be applied to universities. Simon Birmingham has indicated that he does not intend to use it in this way.
June 16th, 2017 at 3:44pm
Geoff Sharrock
Mark, much thanks - this clarifies.
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