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

An earlier post was my inference and guesswork from fragmentary Easter Sunday announcements. This post uses material from FAQs issued by the Department of Education on Tuesday.  For readers who do not need to be across the technical detail of higher education funding I recommend my article for The Conversation rather than this post.

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. Whether this is due to COVID-19 or tough NSW market conditions is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

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

The legal basis for funding undelivered student places will be the Other Grants category in HESA 2003 (which currently supports equity funding, the research block grants, and other things). The FAQ says that this can be done via an amendment to the Other Grant Guidelines. I am interested to see more on that point, as it is not obvious that this purpose fits clearly within any of the twelve nominated areas of other grant funding set out in section 41-10 of HESA 2003. However, I agree that this is the best place in the Act for an ad hoc payment.

Although universities will eventually get their full original 2020 expected CGS payment, there will be delays. Given the HESA 2003 rules, legally the department will have to stop paying 2020 instalments when they know that a university’s entitlement has run out. With a 5 per cent shortfall,  Sydney would miss its last 2020 payment. But the Department says the balance will not be paid until mid-2021, after the usual final reconciliation of enrolments and payments.

In the unlikely event that a university gets JobKeeper payments, it will not also receive funding for non-enrolled students. That would need to written into whatever legal mechanism is used for the CGS funding guarantee.

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.

Under the assistance package, higher education providers can be paid their 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, even if students never turned up or dropped subjects because they were unhappy about going online.

However, HELP advances for students who did not incur a debt will need to be repaid by the higher education provider between 2022 and 2029.

Although outside the original intent of the legislation, I think this is probably already legal under the wide debt recovery provisions in 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 FAQs recognise that minister has no current legal authority to grant this exemption (which is imposed under section 137-10 of HESA), and so it is ‘subject to the passage of legislation’. This creates some doubt for providers and students, but I think a temporary measure would pass through the Senate with few or no objections.

Funding for short courses

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.

The FAQs say that students will receive a ‘higher education certificate’ for a short course of up to four units. The minister has also used the language of  ‘diploma certificate’, but the Department is steering clear of this terminology, as students can take subjects at any higher education coursework level – diploma, bachelor, graduate diploma, graduate certificate, masters by coursework.

The FAQs are specific that discounted short courses must be online and only available to commencing students. The FAQs strongly imply that they are for workers displaced by the COVID-19 crisis. Such restrictions are legally-permissible conditions of funding but unusual, as universities are normally given autonomy in student selection.

The discounted courses will only operate between 1 May 2020 and 1 December 2020. Students who remain enrolled after 1 December will have to pay non-discounted student contributions.

CGS payments

Higher education certificate places are restricted to national priority fields of education (precise fields are listed below in the context of student contributions). ‘National priority’ is a legal term (section 30-20 of HESA 2003). To allow for a promised 1000 non-university higher education provider students to receive short-course funding the definition of ‘national priority’ will need to be changed in the Commonwealth Grant Scheme Guidelines.

The normal discipline-based Commonwealth-contribution will be paid. However, this is not necessarily ‘new’ money. If universities are under-enrolling relative to their maximum grants in either designated (postgraduate and sub-bachelor) or non-designated (bachelor) categories that student load will need to be used to support these certificate places. This weaves in with a previous announcement that the government wanted flexibility between categories of student funding.

One obvious implication of this requirement to use existing allocations of student places or funding is that under-enrolling universities should not participate in this scheme. With free money on offer via the CGS funding guarantee, they should just take it and not incur the cost of teaching additional students.

Universities that are not under-enrolling domestic students are invited to email the Department for an increased maximum grant amount. The FAQs do not specify any cap on funding, but previous media reports referred to 20,000 places.

As I suggested in my original post, the certificate policy needs significant legal workarounds to operate in the short term. Under section 36-5 of HESA 2003, to be a Commonwealth supported student a person has to be enrolled in a legally-recognised qualification, and the funded subjects have to be in relation to that course of study. A higher education certificate is not a legally-recognised qualification.

Acknowledging this problem, the FAQs say providers will be required to enrol students in a course leading to a qualification. While this makes a certificate enrolment technically legal, promoting such certificates seems to me to breach the policy intent of the law, which is to encourage students to complete full qualifications.

Student contributions and HELP

The discounted student contributions are even more problematic than the CGS payments. Student contributions will be $1,250 for six months study in nursing, teaching, psychology, English, maths, foreign languages or agriculture. They will be $2,500 in allied and other health, IT, architecture and building, science engineering, medical science and environmental studies.

In most cases, this is about half what students would normally be charged. As the chart below shows, the proposed reduced student contributions significantly reduce the total funding per student place. The marginal cost of an additional student in an online subject that is already being taught may well be below the new funding rates, but low student contributions make short courses less financially attractive to higher education providers.

The reduced profit margin could be greater than the chart suggests, because the existing courses most likely to be adaptable to this short format, the graduate certificates and graduate diplomas, are primarily a full-fee market. In 2018, there were about 3,000 full-time equivalent CGS-funded students in ‘other postgraduate’ courses, but 12,000 domestic full-fee places. Students who might have taken one of these courses on a full-fee basis could now get it at a lower price. Good for students, not so good for universities desperate for revenue.

Another problem for universities is that once a student has enrolled in a course leading to a qualification on a Commonwealth-supported basis they remain a Commonwealth-supported student for the rest of that course. They cannot be switched to full-fee to complete the qualification they enrolled in.

How will the government get universities to set lower student contributions? 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.

Universities could voluntarily offer to charge reduced student contributions. An email sent by the Department of Education to vice-chancellors, which I have seen, suggests that universities are being asked to reduce student contributions for these short courses.

But the government may try to enforce this using the worst provision in HESA‘s more than 400 pages: section 30-25(2), which allows the government to attach conditions to grants.

Section 30-25 has only a couple of express constraints on 30-25(2), but the extent of the discretion it grants is an important issue. In particular, can it be used to enforce an ‘agreement’ that express statutory rights – those in sections 19-87 and 93-10 – cannot be exercised?

Admittedly I would not pass my late 1980s administrative law exam today (though it was one of my favourite subjects), but the legislation is the paramount legal document. On subjects for which the legislation does not create specific rights or restrictions 30-25(2) requirements are (legally) OK. Requirements like places only going to commencing students or students who lost their jobs recently would fall into this, as they are not likely to breach the student selection fairness provisions in sections 19-30 and 19-35. But I am not convinced that universities can be required to have lower student contributions. 

Access to HELP has the same issue as entitlement to a CSP – it needs enrolment in an AQF course for HECS-HELP (section 90-1 of HESA 2003) and for FEE-HELP (section 104-10,) but with limited exceptions for subjects taken through Open Universities Australia (section 104-1(f(ii)) and for bridging courses for overseas trained professionals (section 104-1(f)(iii)). However, the enrol-them-in-a course workaround for the CGS provides a technical fix to this issue.

Admission practices

Another issue that higher education providers should be thinking about is how they market ‘certificates’ that encourage students to leave before finishing a course. Under the admissions standards, they should not accept students when they are aware of ‘known limitations’ that would impede completion of a course. A student not planning to finish a course sounds like a known limitation to me.

My efforts a couple of years ago to persuade TEQSA to focus on known limitations more broadly, rather than on just academic ability matters, went nowhere. But giving students a certificate for dropping out does seem rather blatant.

Regulatory fee relief

The regulatory fee relief is wider than I thought on Sunday.

Registration fees for TEQSA and CRICOS for 2020 and the first half of 2021 will be waived, and refunded if already paid.

TEQSA charges for re-registration and course re-accreditation will be deferred until 30 June 2021.

HELP cost recovery charges will be delayed by a year.

Conclusion

I support acting quickly to minimise how many organisations collapse or suffer lasting damage due to COVID-19. However, there is no genuine urgency to the short courses proposal. Students can take FEE-HELP courses or one of the many short courses that are already available from numerous other providers. Parliament should be recalled well before August to properly consider the issues and establish clear legal foundations for new higher education policies.