What legal changes are needed for the Pyne higher ed reform package?

A few people have asked me about what legal changes are required to implement the Pyne higher education reform package. This post summarises what I think the legal situation will be. The relevant legislation is the Higher Education Support Act 2003 (HESA).

Changes to Commonwealth contribution rates

The government plans to introduce new, generally lower, Commonwealth contribution rates. This requires amending section 33-10 of HESA. I’ve heard it said that this will be part of the appropriation bills which by convention are passed by the Senate, but this isn’t right. Those appropriation bills cover only a smallish percentage of government funding, not including the Commonwealth Grant Scheme.

The government has also indicated that it wants to further reduce funding rates for diploma courses and non-university higher education providers. That would require more substantial redrafting, especially if the government intends to expressly fund research through the Commonwealth Grant Scheme. Section 33-10 alludes to the ‘benefits to students’ power in the Constitution. On the basis of the Williams No. 2 case (the school chaplains case), the High Court may well take a dim view of using this provision to fund research. (Update: There are other potential Constitutional foundations that possibly could be used here, such as the corporations power that was used for the TEQSA Act, universities being legal corporations.)

Increasing or abolishing the student contribution cap

This requires amendment of section 93-10 of HESA.

The government has said that international student fees will be the new cap. While not expressed exactly in those terms, this is already legislated through section 36-55 of HESA. What that section says is that student contribution amounts (legally defined as being for students in Commonwealth supported places) can’t be more than tuition fees (legally defined as being for full fee students). As section 36-30 effectively bans domestic full fee undergraduate students in public universities except in very limited circumstances, the tuition fee reference is almost invariably going to be to international students.
There is no requirement to offer courses to international students, and universities can increase their international student fees, so this is not a very strong capping mechanism.

Requiring universities to put 20 per cent of additional student revenue into a Commonwealth scholarship fund

One complexity here is that division 46 of HESA already has Commonwealth scholarships, in this case actually funded by the Commonwealth rather than other students. Apart from that there could be a backdoor way of doing this, via section 30-25(2), which enables the Commonwealth to put almost any requirement on universities not expressly contradicted by the Act as a condition of receiving funding. Given that the Commonwealth once got away with using 30-25(2) to force the University of Melbourne to subsidise the then legally separate Victorian College of the Arts, requiring universities to subsidise their own students would look reasonable in comparison.

That said, legislation or delegated legislation would give the policy a stronger legal basis, so I expect the government will pursue one of those options.

Extending the demand driven system to non-university higher education providers and private universities

To do this properly will require some extensive redrafting of HESA. The institutions currently in the demand driven system are not defined, they are listed individually (in ‘Table A’). The demand driven review argued that we should move to a rule-based system so that institutions do or don’t qualify for grants based on objectively determined facts, not historical factors. This requires linking HESA with TEQSA registration and higher education providers meeting a standard set of requirements.

There are some regulatory workarounds for giving more Commonwealth supported places to non-Table A higher education providers under division 30 of HESA, but I don’t think the government will do this on any scale. For this reform to work on the ground higher education providers need to be confident that it will continue. They will want a stronger legal base than funding agreements that Labor could later decide not to renew.

Including sub-bachelor courses in the demand driven system

This could be done for the public universities by repealing Chris Evans’ 2011 regulatory decision. This could be disallowed in the Senate but I am not sure that either Labor or the minor parties would do this. In itself, this change would benefit public universities and increase equity. However, as NUHEPs are currently major players in the diploma market this reform without a widening of the demand-driven system would leave them worse off. The government may therefore be reluctant to do it in isolation.

Cuts to the Research Training Scheme

The government wants to save $174 million over 3 years from the Research Training Scheme and let universities charge fees to research students. I think the government can make the saving. The legislation at section 41-45 sets out the maximum grants payable under the ‘other grants’ provisions which fund the RTS and other programs. The Senate has already disallowed a previous motion to reduce the maximum amount to be spent on ‘other grants’. But I don’t think the government is required to spend all the permitted money, so this is not fatal to the cuts.

The complication will be letting universities charge fees. The relevant guidelines specifically exempt RTS students from paying them. The Senate could disallow repeal of these guidelines. However, this would leave universities $174 million short.

Introduce a real interest rate on HELP debt

This requires amendment of division 140 of HESA.

Lower the threshold for HELP repayment

This requires amendment of section 154-10 of HESA.

Remove the 25 per cent loan fee on undergraduate FEE-HELP loans

This requires amendment of section 137-10 of HESA.

Replacing MyUniversity with QUILT (Quality Indicators for Learning and Teaching)

This can be done administratively. One reform that is near certain to happen.

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