Unsureness over assurance arrangements

Industry figures are asking how long current tuition assurance arrangements can hold up. An accelerating failure rate among international colleges is putting Australia’s struggling tuition assurance arrangements under unprecedented strain, according to new figures revealed to international education peak bodies in Canberra last month. And the federal Opposition has criticised the government’s treatment of its own consumer protection scheme, the Education Services for Overseas Students (ESOS) Assurance Fund, with a promised funding top-up “watered down” to a loan. DEEWR told the Canberra roundtable that 15 colleges had closed so far this year, just shy of the 16 closures for the whole of 2009. It said that of around 5800 students displaced last year, just 64 per cent had been offered alternative courses through the relevant industry-run tuition assurance schemes (TASs) – the frontline consumer protection option if collapsed colleges won’t reimburse their students, as is usually the case. Around 10 per cent of the affected students rejected their TAS offers and 24 per cent had been referred to the government’s backup scheme, the ESOS Assurance Fund, which refunds course fees. This year, over 3700 students have already been displaced by closures and only 51 per cent have been offered courses through the TASs, with another 6 per cent so far referred to the ESOS Fund. This leaves a potential backlog of over 3500 students still waiting for alternative courses or refunds. The news may add to speculation that the TAS arrangements are heading towards a tipping point, with a gradually diminishing pool of alternative colleges being asked to accommodate a growing pool of displaced students. It will also add to speculation – rife since August – that the ESOS Assurance Fund won’t be able to provide anything like the safety net needed to reimburse students if there’s a systematic failure of the TASs. The federal government allocated the fund an extra $5.1 million in last month’s budget, while a special members’ levy raised another $1 million. But sources guesstimated that the exposure from the current backlog of students alone could be $20 million or more. And further closures appear inevitable due to the combined pressures of the high Australian dollar, tighter student visa application processes, previous college closures, attacks on students and the skilled migration reforms. The requirement for colleges with overseas students to re-register this year will also lead to more closures, sources predict. But Andrew Smith, CEO of the Australian Council for Private Education and Training – which runs the biggest TAS – stressed that ACPET couldn’t help students who didn’t follow up referrals to the scheme. Of those who have over the last 18 months, he said, the scheme has placed around 80 per cent. Twelve months ago, he said, the placement rate was around 92 per cent. “But we’ve got a few closures we’re still working on and when we’ve finished those I suspect it’ll jump back up. “Is that perfect? No. We’d like to be achieving 100 per cent. But we’ve got a pretty robust consumer protection framework in Australia that wasn’t built for the sort of situation we’ve got now, yet it’s holding up well.” Smith conceded that it was getting harder to place students. “You’ve got businesses under pressure. How many more students can you ask them to teach free of charge? “But any suggestion that the system is near to collapse is not correct. Governments, ourselves and providers have got to understand that this is a unique situation, and it requires flexibility and unique solutions.” Meanwhile the shadow training minister, Mathias Cormann, criticised the federal government for providing the $5.1 million funding top-up for the ESOS Assurance Fund – promised by education minister Julia Gillard in February – as a loan. “The international education industry has been exposed to yet more uncertainty with Julia Gillard turning her back on funding commitments made less than three months ago,” Cormann said. “On the quiet, that very recent ‘funding’ commitment was withdrawn and watered down into a ‘loan’ instead. This doesn’t address the serious financial viability issues faced by the fund.” Cormann also said Gillard had been advised in November that the fund was in danger of becoming insolvent. However, Gillard’s spokesperson denied that she had turned her back on her commitment or that the fund was at risk of insolvency. “After extensive consultation with the fund managers, we announced that $5.1 million would be made available if required. As the fund currently has a positive balance of $2.04 million, as of April 2010, the government’s loan has not yet been drawn upon.” In budget estimates hearings last week, Cormann quizzed DEEWR officials about the administration fees for the ESOS Assurance Fund. “In 2009 the fund raised $2.3 million in regular contributions, and a staggering $954,000 was spent on admin costs to manage the fund. “That’s 41 per cent. You’re confident that you’re getting the best possible value for money in terms of the way this is currently administered?” But DEEWR secretary Lisa Paul said it made no sense to consider administration costs as a proportion of the fees. She said the running costs depended on the degree to which the fund was activated, not the fees. “The cost of administering it is high because of the highly personalised attention,” she said. Acting deputy secretary Colin Walters said the fund managers, PricewaterhouseCoopers, had dealt with “quite a large volume of students”. “This is a facility which would be quite difficult for a government department for example to deal with, because of the unpredictability of the number of calls coming along.”