The International Tuition Protection Scheme (TPS) has long been a key component of Australia’s education sector, designed to safeguard international students from financial loss if their education provider unexpectedly shuts down. However, as 2025 approaches, concerns are rising that the current TPS levy model may not be adequate to meet future demands. The education sector, already reeling from changes in visa policies and fluctuating international enrolments, could face significant challenges if the TPS cannot cover its financial obligations.
The potential shortfall in the TPS levy poses a severe risk not just to the students who depend on it but also to Australia’s reputation as a leading destination for international education. It raises critical questions about whether the current system is prepared for the financial exposure it could face in the coming years.
Why the TPS Matters
The TPS was established to provide protection for international students by ensuring they receive refunds or placements with alternative providers if their current provider closes down. This system is funded through levies imposed on educational institutions that are collected to build the ESOS Assurance Fund. This fund is the financial safety net meant to cover unspent tuition fees in the event of provider closures.
While this approach has worked well in the past, growing concerns about the volatility in the private education sector, especially among vocational education and training (VET) providers and higher education institutions, have cast doubt on whether the fund will be sufficient to meet future challenges.
The international education sector, a major contributor to Australia’s economy, requires a robust safety net to maintain the confidence of students and their families. Without proper protection, the fallout from provider closures could have far-reaching consequences, not only for students but also for the broader economy and the country’s global standing.
The Growing Risk of Provider Closures
Australia’s international education sector is facing a number of external pressures that are increasing the risk of provider closures. These include stricter immigration policies, changes in visa regulations, and increased global competition for international students.
In the face of these challenges, financial instability has become a growing issue, particularly among private VET and higher education providers. Many of these institutions, operating on tight budgets, are struggling to maintain financial viability in a highly competitive market. This raises the spectre of provider closures, a situation that would leave students stranded without refunds or the ability to complete their education.
The current TPS levy model may not be adequately prepared for such a scenario. While the ESOS Assurance Fund contains funds to provide protection, the increasing risks suggest that the levy may not be sufficient to cover all potential claims in 2025. This underfunding could leave thousands of students without the financial safety net they expect when enrolling in Australian educational institutions.
Underestimating Financial Exposure
One of the core issues with the current levy structure is that it may underestimate the financial exposure the TPS could face in 2025. The number of international students enrolled in Australia has grown significantly in recent years, increasing the potential liability if a wave of provider closures were to occur.
Furthermore, the current levy does not seem to take into account the changing dynamics of the education sector. For example, private institutions' increasing reliance on international students has amplified the risk. As some providers cut corners to attract more students and reduce costs, the likelihood of closures increases. The TPS, which was designed to be a reliable safety net, may find itself overwhelmed by the sheer volume of claims if these closures occur at scale.
Implications for Australia's Global Reputation
Australia has long been a preferred destination for international students. Its high-quality education system, diverse cultural offerings, and relatively straightforward visa processes have attracted students from all over the world. However, the potential failure of the TPS could do irreparable damage to this reputation.
If international students start to lose confidence in Australia’s ability to protect their investment in education, they may begin to look elsewhere. Countries like France, Germany, the United States, and the United Kingdom have been increasingly aggressive in their efforts to attract international students, and any perception that Australia’s system is unsafe or unreliable could cause a significant drop in enrolments.
The financial implications of such a decline would be felt across multiple sectors. Education providers would lose a vital source of revenue, but the impact would also extend to housing, transport, retail, and even the labour market, as international students often take up part-time jobs while studying in Australia.
Potential Government Intervention
If the TPS fund runs out of money, the Australian government may have no choice but to step in. However, government intervention should be seen as a last resort, as it could lead to political controversy and place a financial burden on taxpayers. It could also signal to international students and the global education community that Australia’s education sector is unstable, further eroding trust.
Increased government support for the TPS could also create long-term financial implications, requiring higher taxes or cuts in other public services to cover the costs. The ripple effects of such a scenario could exacerbate economic challenges, especially in an environment where Australia is trying to maintain its competitive edge in international education.
A Need for Reform: The Case for a Dynamic Levy Structure
Given the growing risks and the potential for financial shortfalls, it is essential that the Australian government considers reforming the current TPS levy structure. One potential solution is to adopt a dynamic, risk-based model that takes into account the financial health of individual providers and the likelihood of provider closures.
Under this model, providers that present a higher risk of closure—based on factors like financial instability, regulatory compliance, and student satisfaction—would be required to pay higher levies. In contrast, providers who consistently meet their obligations and have a proven track record of financial health would be rewarded with lower levy payments.
This approach would provide incentives for providers to maintain high standards while also ensuring that the TPS has the necessary funds to cover potential claims. By making the levy more adaptive to individual risk profiles, the government could prevent good providers from being unfairly penalised while also ensuring that high-risk institutions contribute their fair share.
Strengthening Oversight and Regulation
In addition to reforming the levy, the Australian government should consider strengthening oversight and regulation of the education sector to prevent provider closures in the first place. A more rigorous monitoring system that regularly assesses the financial health and operational practices of providers could help identify warning signs before they lead to closures.
This oversight could include audits, student satisfaction surveys, and regulatory compliance checks. By catching potential problems early, regulators could take corrective actions, such as imposing financial penalties or requiring additional financial guarantees from providers at risk of closure.
Protecting International Students: A Priority
At the heart of this issue is the need to protect international students, who are often vulnerable when their providers close unexpectedly. These students invest significant time and money in their education, often relocating to Australia and making life-changing decisions based on the promise of a quality education experience.
The current system does not adequately prioritise student protection. By reforming the TPS levy and increasing oversight, Australia can demonstrate its commitment to safeguarding the interests of international students. This, in turn, would help to rebuild trust in the system and ensure that Australia remains an attractive destination for students seeking high-quality education.
Time for Action
The 2025 TPS levy poses a significant risk to the integrity of Australia’s international education system. Without reforms to address the growing financial exposure and increasing risks posed by provider closures, the TPS may not be able to fulfil its mission of protecting international students.
The Australian government must take proactive steps to reform the levy structure and strengthen oversight in the education sector. By doing so, it can ensure that the TPS remains financially viable and capable of fulfilling its obligations. The consequences of inaction are clear: lost student confidence, financial instability, and damage to Australia’s global reputation as a leader in education.
With the right reforms in place, Australia can continue to offer a world-class education experience for international students while ensuring that the system is equipped to handle future challenges. The time for action is now.
