Australian government takes over student insurance

Government steps in after scams undermine consumer protection arrangements

August 16, 2018
student insurance

Australia’s government will nationalise consumer protection arrangements for domestic tertiary students whose colleges go bankrupt, years after doing the same thing for international students.

Under plans to be announced on 17 August, the government will extend its “tuition protection service” – which was designed exclusively for overseas students – to Australian vocational and higher education students.

The move, to be detailed at a Sydney conference, comes amid concerns that the boom-bust cycles that have plagued Australia’s vocational training sector could spill over into higher education. “This is about protecting students no matter where they study,” assistant training minister Karen Andrews said in a statement.

Australian colleges are obliged to join tuition protection schemes if they enrol international students or locals who pay their tuition through government loans. The schemes, traditionally run by educational representative bodies, organise replacement courses – or, if that proves unfeasible, refunds – for students whose colleges close down.

In 2012, the government took over tuition protection for international students after a plunge in foreign enrolments led to a series of catastrophic college collapses. The downturn was largely triggered by migration policy changes designed to stop people using education as a back-door route to permanent residency.

Late last year, education minister Simon Birmingham signalled his intention to do the same thing with tuition protection for domestic students, in a move prompted by the failures of training colleges that had profiteered from the government’s widely abused VET FEE-HELP training loan scheme.

Some of these colleges went to the wall after the government replaced VET FEE-HELP with the much smaller VET Student Loans programme. The collapses of college chains such as Careers Australia – which left some 15,000 students stranded with unfinished courses when it went into receivership – threatened to bankrupt the representative bodies that administered the tuition protection arrangements.

Ms Andrews said that the new scheme would cover higher education students covered by “FEE-HELP” loans – available to undergraduates studying outside the university system – as well as vocational students. “The new system is simply insurance against failure and loss of reputation,” she said.

“The government has been working closely with the higher education and training sector to ensure we have a system that can take us into the future with confidence.”

She said that the new scheme, to begin next year, would charge levies based on advice from a government actuary. Public training providers will be required to pay administrative levies, while private colleges will also face extra “risk” charges. The service will maintain separate accounts for international and domestic students.

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