The first COVID-19 support package for higher education

Update 15/4/20: This post contains material that has been revised and republished to take into account later information.

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The government now has a support plan for higher education. The key elements are letting universities keep student-related grants and loans in 2020 even if they enrol too few students, funding short courses, and regulatory fee relief.

In this era of government by tweet, media report, media release and media conference the details of how this might work are lacking as of today. I will revise this post as more detail comes to hand. For now, I will focus on the broad outline and pursue my pedantic interest in the legal basis of government policy.

Commonwealth Grant Scheme

The government’s biggest higher education funding program is the Commonwealth Grant Scheme, which pays tuition subsidies of over $7 billion a year. Under the Higher Education Support Act 2003 total payments for the year cannot exceed equivalent full-time student numbers multiplied by the relevant Commonwealth contribution.

Universities are paid fortnightly based on estimates of their CGS entitlement for the year. A few days ago the University of Sydney announced that it was down 5 per cent on its domestic student target (which could include full-fee students, which I will come to below). Whether this is due to COVID-19 or because it was just losing out in a tough NSW market is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

Whatever the reason, the minister now says that universities will be paid their original estimated funding rather than their legal entitlement. This also suspends the need to meet performance funding criteria, which is sensible.

What we don’t know yet is the legal basis for paying universities for student places that they did not deliver. Possibly it will come from the finance minister’s slush fund. 

HELP

The vast majority of students in a CGS-funded place or in a domestic full-fee place borrow under HECS-HELP and FEE-HELP respectively to pay their student charges.  As with CGS funds, universities are paid HELP loans in line with expected eventual entitlements. In normal times the university’s HELP entitlements are revised down if they have fewer students than anticipated.

At his media conference, the minister said that universities would be paid their FEE-HELP expected entitlements for 2020, but this would need to be paid back over eight years if it was more than their actual entitlements. The media release suggests that he meant all HELPs; see my which loan scheme is that? primer.

As a result formerly-estimated HECS-HELP payments for Commonwealth-supported students, as well as formerly-estimated payments for full-fee undergraduate and postgraduate students under FEE-HELP, can still be paid even if students never turned up or dropped subjects because they were unhappy about going online.

Although outside the original intent of the legislation, I think this probably already legal under sections 164-5 and 164-10 of the Higher Education Support Act 2003

The minister also said that there will be a ‘six-month exemption from the loan fees associated with FEE-HELP’. This is the 25 per cent premium added to the debts of undergraduate FEE-HELP students. As such students are banned except in narrow circumstances at public universities, this is aimed at supporting demand for private higher education providers.

The minister has no current legal authority to grant this exemption (which is imposed under section 137-10 of HESA), so I think it will need to be retrospectively legislated.

Funding for short courses

The most interesting, but also the most legally problematic, announcement is that:

The cost to study short, online courses from our world-class universities and private providers will be slashed to help Australians retrain. The courses will start at the beginning of May and initially will run for six months.

A report in the former-Fairfax media elaborated that they would:

focus on priority areas including nursing, teaching, counselling, maths, English, languages, agriculture, allied health, IT, engineering, environmental studies and science. Students can get HELP loans for the courses, which will cost either $1250 or $2500. Mr Tehan said the package could potentially support 20,000 places.

The minister has used varying language to describe these courses, which creates some confusion. In the media conference, he referred to degrees and diplomas, and in the Sydney Morning Herald he says that ‘we have created for the first time a diploma certificate and we are expanding graduate certificates.’

I am not sure what a ‘diploma certificate’ would be, but short graduate diploma and graduate certificate course are not unusual. In 2018, there were about 3,000 full-time equivalent CGS-funded students in ‘other postgraduate’ courses, and another 12,000 domestic full-fee places. These courses normally take six months to a year in full-time equivalent study.

The government could allocate additional places via university funding agreements to CGS-funded diploma and graduate certificate courses. The legal problem with this is in the proposed pricing.

Maximum student contribution amounts are set under section 93-10 of the Higher Education Support Act 2003, and for 2020 range from $6,684 to $11,155 on an annual basis, depending on the subject-level discipline. Within these maximum prices, the university sets the student contribution under section 19-87. The minister does not have any power to set or cut course prices.

As universities almost always charge the maximum student contribution, a six month or a year-long course would usually cost much more than $1250 or $2500. Financially, it’s not a very attractive proposition for universities, unless there is a special additional subsidy coming from somewhere else (the finance minister’s slush fund?).

At his media conference, the minister also used the language of ‘microcredentials’, which can be much shorter than a year. They are not regulated under the Australian Qualifications Framework (AQF) and so it is up to the education provider to decide how much content to include.

Most universities are moving into the microcredential market, but currently microcredentials are not eligible for either CGS or HELP funding. With narrow exceptions, public funding is linked to higher education awards listed in the AQF.

I doubt microcredentials can be funded by May other than in ways that would normally send the Auditor-General into a meltdown.

The workaround relies on university microcredential courses also counting as subjects in an AQF degree. If the course is equivalent to only one or two subjects in most cases they can be offered at $1,250-$2,500 within the existing student contribution maximum amounts.

In the case of postgraduate courses, the government could allocate more Commonwealth-supported places to the relevant disciplines. The university could enrol the students in a related AQF degree, knowing that it is highly likely that they will drop out after completing the one or two subjects that make up the microcredential. Having technically enrolled in an AQF course, the student can borrow under HECS-HELP.

One trap for the universities is that once a student has enrolled in a course on a Commonwealth-supported basis they remain a Commonwealth-supported student. This could create added costs or revenue losses from continuing students.

On a non-subsidised basis, the universities could do the same thing for full-fee course through FEE-HELP. However, again we have the issue that the minister has no power to set fees, and without a tuition subsidy the course would not be financially attractive to the university.

But if there is no current connection to a degree I can’t see how this short course proposal is going to work under existing legislation.

Of course, there is nothing stopping students doing microcredentials or other short courses that are not funded by government. There is already a big market for online short courses without any government involvement, often for much less than $1,250.

Regulatory fee relief

The government is also going to defer new charges for TEQSA and the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) until 1 July 2021.

Under the TEQSA Act, TEQSA determines fees by legislative instrument with ministerial approval. The increased cost recovery fees don’t seem to have been enacted, so this can just be delayed a year.

The CRICOS fees seem to be still at the consultation stage, where presumably they will stay for a while.

There is no mention of the HELP cost recovery fee. I thought this one was dubious to begin with. Higher education providers should be charging the government to deliver one of its social policy programs rather than the other way around.

Conclusion

I support the need to act quickly to minimise how many organisations collapse or suffer lasting damage due to COVID-19. However, some of these  announcements go well beyond what current higher education funding legislation was intended to support. For this and other reasons, Parliament should be recalled well before August to properly consider the issues and establish clear legal foundations.


Updated to include material about diplomas 12/4/20, 5.30pm.

Updated with edits and minor clarifications, 13/4/20, 9.00am.

2 thoughts on “The first COVID-19 support package for higher education

  1. Thanks for this explainer, Andrew.

    Re: funding for the shorter courses:
    Can’t the Govt just allocate the additional CSPs through funding agreements, and then waive all but $1,250 or $2,500 of the HECS-HELP debt a student accrues for the course?

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  2. Paul – They could legislate to do that. But I think it would be bureaucratically simpler to add a new category to the ‘other grants’ list at section 41-10 of HESA which allowed temporary payments of the difference between the prices Tehan announced and the student contribution amounts. There is a similar concept already there at item 12.

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