Sunday, May 03, 2020

Will COVID-19 be a catalyst for change at Australia's universities?

Ten years ago, Australia's international education sector was in crisis mode.

Economic headwinds, scandals in vocational educational and a series of well-publicised attacks on students had seen the number of Indians seeking Australian qualifications crater.

Between 2009 and 2011, Indian student numbers dropped from 26,000 to 10,000, quickly wiping $225 million from university budgets. Longer term, the downturn deprived them of an estimated $1.3 billion. The contraction was viewed by some as a painful lesson in risk but the impact was mitigated by the unstoppable rise of one market: China.

A decade on, after consistent annual growth in international education of around 14 per cent, it is over-exposure to the Chinese market in particular that is the source of the sector's woes. And the shock from the COVID-19 pandemic makes the previous Indian student downturn look trivial.

Universities are looking at losses of $4.6 billion or more in the next six months, with 21,000 jobs on the chopping block, according to peak body Universities Australia. Modelling by Victoria University's Mitchell Institute projects the blow could be up to $19 billion over three years.

"It’s an extraordinary impact. Profound and far-reaching," says Western Sydney University vice-chancellor Barney Glover. "I don't think we have faced anything like this in higher education at any time, certainly in the last 30 years."

The pain started early for universities, as soon as the government's initial ban on non-citizens travelling from China was imposed in early February, stranding over 100,000 students offshore. Large numbers of Indians, Vietnamese, South Koreans, Brazilians and others have also been locked out. The number of onshore international students in higher education is now sitting at 330,000, down about 30 per cent on last year.

Institutions have since put major capital works on hold, frozen non-essential spending and started negotiating with the union to minimise job losses. The federal government has guaranteed $18 billion in funding for domestic education and unveiled new online short courses but the package does not address the shortfall in international education revenue. Universities are also struggling to meet the revenue downturn thresholds required to qualify for JobKeeper wage subsidy payments.

The extent of the impact will depend on what happens with the government's travel restrictions and the pace of global recovery from the pandemic. International student numbers will still be significantly depressed in semester two.

"My sense is that most universities will take a big hit in 2020 but it will not be terminal because they are taking strong finance measures ... but the impact will vary from university to university," says University of Queensland chancellor Peter Varghese, a former secretary of the Department of Foreign Affairs and Trade.

"I think if we find ourselves in 2021 with international students unable to enrol in Australian universities then we are in a completely different ballgame and completely different world of pain."

Education Minister Dan Tehan won't be drawn on when travel restrictions might be eased for international students. He says reopening campuses for domestic students and international students already in Australia is the priority.

"My hope is that we will hear sooner rather than later about a move back to campuses being reopened, with adherence to the Australian Health Protection Principal Committee guidelines around social distancing. But campuses will be looking to reopen for semester two," he says.

Institutions are also anxious to make sure international students currently in Australia, having lost work and facing barriers to returning home, are looked after. If they aren't, many won't be in a position to pay fees and there could be a long-term hit to Australia's reputation, especially as countries like Canada, Britain and New Zealand offer more generous support. Prime Minister Scott Morrison also shocked the sector by saying recently that it was "time to go home" for temporary visa holders, including students, if they couldn't support themselves.

"I think it's the messaging and signalling that we need to make sure the government is getting right," says University of Sydney vice-chancellor Michael Spence.

One senior academic figure sees an "overt hostility" towards universities in the government's restrained support for the sector so far. Tehan says Coalition politicians just want to ensure funding is "spent well, taxpayers are getting value for money and institutions are delivering on their core objectives". The government has also emphasised that no sector is immune from the economic ramifications of the pandemic.

Universities are hoping the crisis will convince people of the importance of research – with academics around the country part of critical efforts to tackle COVID-19. And the institutions are billing themselves as key to Australia's economic recovery as people seek to upskill or retrain. They are expecting a spike in demand because of a weak jobs market and Tehan has acknowledged that will need to be funded somehow.

La Trobe University vice-chancellor John Dewar says the sector is ready to participate in preparing the nation's future workforce.

"But it would be nice if government were to reciprocate and to understand just how important universities can be in that process," Dewar says.

The high-stakes crisis has triggered a reappraisal of the business model that has prevailed in universities over recent decades. The growth of international education has been a shared endeavour with Labor and Coalition governments, who encouraged universities to diversify their revenue streams, taking the pressure off the public purse. The government accounted for around 85 per cent of university funding in 1990; today, it is 30 per cent.

"I think the business model was already being assessed in the lead up to COVID-19 although there is no doubt that the pandemic has led to more urgent thinking about the sector’s reliance on international education," says Tehan.

While noting the efforts to diversify source countries of students, he wants to see international education "rebounding strongly" after the crisis and argues Australia's success in dealing with COVID-19 will make it an attractive destination.

The relentless growth of international education has seen it become Australia's third-largest export earner, behind only iron ore and coal. It has become a pillar of budgets – worth $39 billion last year. Among the elite Group of Eight universities, fee-paying overseas students account for 27 per cent of revenue, up from 6 per cent 20 years ago.

Universities are quick to add this is not just about the money. They have talked up the infusion of multicultural talent on campuses and the goodwill towards Australia generated among hundreds of thousands alumni spread throughout Asia.

Labor education spokeswoman Tanya Plibersek says the university funding model needs to be scrutinised after the crisis. She thinks there is a "middle ground" to be found where governments provide more funding for education and research.

"Putting international education on a stronger and more sustainable footing will be part of that. Making sure there is adequate funding for education and research is a really important part of that. There must be a greater role for public funding," she says.

"I think universities have been pretty conscious of the risks of over-dependence on one market," says Varghese.

"Every university has been aware for some time of that and has strategies for diversifying their sources of international students. But the reality is that while Chinese demand remained very high, those diversification strategies didn’t advance as easily as people might have hoped."

Previously, the tumultuous political relationship between Beijing and Canberra was the more apparent risk in over-reliance on Chinese students. The political risk was underscored last week when Chinese ambassador Cheng Jingye, criticising the Morrison government's pursuit of an independent inquiry into the origins of COVID-19, warned of a potential boycott by Chinese parents who might reconsider "whether this is the best place to send their kids".

People's thoughts on what should happen with international student numbers are one thing. But the inevitable reality is that enrolments, from China and elsewhere, could be suppressed long-term because of the COVID-19 shock. Up to now, international education revenue has cross-subsidised research, allowing Australian institutions to climb in global rankings, and allowed them to invest significantly in their campuses.

"The real issue here is if we lose the revenue from international students, what takes its place?" wonders Varghese.

Is there any appetite whatsoever inside government for an increase in funding for universities?

"I don’t think that has been tested because while international student revenue has been flowing in, the government really hasn’t had to face up to that question," he says.

Dewar thinks international student revenue may take two to five years to recover and "that will sharpen the focus on what government can and will do for the sector".

"I'm sure it will be the catalyst for some changes," he says.

"It is arguable that the current model is not fit for the long term post-COVID recovery and we need new ideas recognising that higher education is crucial to a knowledge economy and community resilience," says Glover, including a "need to consider the level of commonwealth investment and the relative private versus public contribution to the costs".

While philanthropy and commercialisation can yield valuable revenue for Australian universities, there are only two sources of funding that can realistically underpin their budgets: government grants and student fees. Six years ago, the Coalition government tried to uncap fees for domestic students, which would have allowed universities to charge significantly more. The measure faced major political hostility and was ultimately withdrawn.

Spence says philanthropy and commercialisation help but are not the main game. "It's student fees or government grants. So there has to be movement in one or the other," he warns.

Plibersek is cold on the idea of revisiting deregulation of domestic fees. "Australians students already pay a larger share of their university education than most comparable countries. If people earn a high income because of their university education, they should pay more tax in our progressive tax system," she says.

Tehan is not quite ready to engage with the difficult longer term questions about the sector and says the first priority is getting through the crisis. "Let’s get the campuses open," he says.

This article written by Fergus Hunter.

Source: The Sydney Morning Herald, May 3, 2020

Australian Minister wants university students back for semester two

Almost 1.5 million university students should be back on campus by July after federal Education Minister Dan Tehan declared he wanted to see the sector return to face-to-face teaching for second semester.

Mr Tehan also warned the shock from COVID-19 had triggered an "urgent" look at the international education business model at universities. Vice-chancellors, joined by Labor, are calling for a major rethink of Australia's higher education funding system as a potentially sustained drop in full-fee-paying overseas student enrolments threatens to shrink the sector.

Universities were forced to close campuses and move to online learning upon the introduction of strict social distancing measures, adapting rapidly as they also weather the loss of billions in lost international student revenue. Onshore numbers of overseas students are down 30 per cent on last year's levels.

"The first step has to be our campuses reopened here for domestic students and those international students who are onshore. That's the first priority of the government," Mr Tehan told The Sun-Herald and The Sunday Age.

"My hope is that we will hear sooner rather than later about a move back to campuses being reopened, with adherence to the Australian Health Protection Principal Committee guidelines around social distancing. But campuses will be looking to reopen for semester two."

Asked about the prospect of border restrictions being eased for 2021 international student arrivals, he said: "Let's get the campuses open. I mean that's a pretty important first step ... then, obviously, things will flow from that."

As universities confront the ramifications of the pandemic, Mr Tehan said the sector had already been scrutinising its reliance on international education, especially the concentration of Chinese students, but "there is no doubt that COVID-19 has led to more urgent thinking about the sector’s reliance on international education" and how that model will look in the future.

The vice-chancellors of Western Sydney University, La Trobe University and University of Sydney warned a lasting impact on revenue would need to be confronted by government as enrolment numbers remain depressed by the ongoing global ramifications of the pandemic.

WSU vice-chancellor Barney Glover said it would be essential to look at the funding model, especially "the underfunding of research and how we can maintain our world class research capability in the face of several years of recovery in international education".

University of Sydney vice-chancellor Michael Spence said university researchers had proved their value through the unprecedented bushfire season and the COVID-19 crisis and their efforts needed to be funded.

"What is the government’s support for that research system going to be? And in particular what is it going to be if the international student market is not as robust as it has been so far? And I think that’s a major policy question for the country coming out of this crisis."

La Trobe vice-chancellor John Dewar said: "Working on the assumption that international numbers are not going to rebound for 2, 3, 4 maybe even 5 years, I think that will sharpen the focus on what government can and will do for the sector."

Labor education spokeswoman Tanya Plibersek said the nation needed to take "really serious look" at university financing.

"Putting international education on a stronger and more sustainable footing will be part of that. Making sure there is adequate funding for education and research is a really important part of that. There must be a greater role for public funding," she said.

Australia's spending on research and development fell to 1.8 per cent of GDP last year, below the OECD average of 2.4 per cent. University research spending has held up but it has been heavily subsidised by revenue from international students.

Mr Tehan said international education was a key driver of economic growth and employment and he wanted it to recover. "Rebounding strongly through going back to those areas which were enabling our economy to grow is going to be very important and international education was a key component of that," he said.

"Rather than look at them picture as glass half empty, I think we need to look at it glass half full and the bigger decisions have to be around how do ensure diversification? How do we deal with sustainable growth? And how do we make the case for why this is so important economically for the nation?"

This article written by Fergus Hunter.

Source: The Sydney Morning Herald, May 3, 2020

Saturday, May 02, 2020

Angry undergrads are suing US colleges for billions in refunds

College students, kicked off campus by the coronavirus, have a new extracurricular activity: litigation.

U.S. undergraduates have sued more than 50 schools, demanding partial tuition, room-and-board and fee refunds after they shut down.

The proliferating breach-of-contract suits, many of them filed over the last week, target some of the biggest names in higher education: state systems including the University of California and Arizona State, as well as private institutions such as Columbia, Cornell and New York University.

The students’ lawyers, advertising on sites such as, are seeking class-action status on behalf of hundreds of thousands of students. While legal experts say the suits face high hurdles, they could potentially involve billions of dollars in claims.

To justify annual prices that can top $70,000 a year, colleges have long advertised their on-campus experience, including close contact with professors and peers who will become a lifelong network.

Now, millions of students are instead studying online. Many of the suits are seeking compensation for the difference in value between the virtual and in-person experience. Plaintiffs include Grainger Rickenbaker, a freshman majoring in real estate management and development at Philadelphia’s Drexel University, which charges more than $50,000 in tuition and another $16,000 in room, board and other fees.

“I am missing out on everything that Drexel’s campus has to offer -- from libraries, the gym, computer labs, study rooms and lounges, dining halls,” said Rickenbaker, 21, who is suing for a partial refund as he works remotely from his home in Charleston, South Carolina.

Most colleges declined to comment on the suits. The California State System said it would defend itself against a complaint that understates the services it’s still providing. Arizona State said it was giving a $1,500 credit to all students who moved out of university housing by April 15.

Peter McDonough, general counsel for American Council on Education, a college trade group, said schools are battling circumstances outside their control. They’re putting tremendous time and resources into supporting remote learning, while still paying professors and bearing other costs, he said.

“Faculty and staff are literally working around the clock,” McDonough said. “We’re in the middle of a catastrophe. Schools are doing their best to work their way through it.”

Some colleges, including Harvard, Columbia, Middlebury and Swarthmore, have agreed to refund unused room and board. Others are offering credits or haven’t decided what to do, according to Jim Hundrieser, a vice president at the National Association of College and University Business Officers.

Payments can add up. Small residential institutions, for instance, may be refunding $2 million to $3 million, while large schools with several thousand on-campus students are likely to return $8 million to $20 million or more, Hundrieser said.

For individual students, the funds can be quite a boon in an economic crisis. A college charging about $8,000 for a semester’s room and board that canceled midway might be sending students a check of about $4,000.

The federal suits vary in their demands. The Anastopoulo Law Firm in Charleston represents students at roughly a dozen schools, including Drexel, and is seeking a partial return of all unreimbursed payments.

In its suits on behalf of California public college students, Chicago-based DiCello Levitt Gutzler is asking only for the return of student fees for such items as transportation and student organizations, which can nevertheless total thousands of dollars a year.

Both the University of California and the California State systems have already agreed to return unused room-and-board. Cal State said it’s still providing services, such as counseling, and will refund fees “that have been unearned by the campus.”

However the complaints are decided, they highlight the stakes for the $600 billion-plus a year higher education industry. Public universities rely on tuition and fees for 20% of their total revenues; private non-profit colleges, 30%, according to the most recent federal data.

In the fall, if many schools open only online, they would forfeit room and board fees and face pressure to charge less tuition. Many are predicting that the pandemic will put financially fragile institutions out of business.

Colleges can expect to see more suits soon, threatening what attorney Anthony Pierce called “an economic tsunami.” On Thursday alone, students filed complaints against Pennsylvania State University, Brown and the University of Pennsylvania, which called the suit against it “misdirected and wholly without merit.” Brown said the crisis hasn’t changed the “core value” of its education.

“The plaintiffs’ bar sees an opportunity here,” said Pierce, a partner heading the Washington office of Akin Gump Strauss Hauer & Feld LLP who recently alerted colleges about the suits’ risks.

The outcome may depend on the paperwork both parties signed. Students are more likely to prevail if they can point to contract terms requiring specific services, according to Joe Brennan, a Vermont Law School professor who is tracking the litigation.

Students generally have housing contracts, just like renters of an apartment, said Barry Burgdorf, a former general counsel for the University of Texas system who is now at Pillsbury Winthrop Shaw Pittman LLP. Families typically don’t have written agreements spelling out exactly what tuition covers.

Colleges will likely argue that they’re excused from past obligations because the pandemic and government shutdown orders made the regular delivery of services impossible.

Even if students can’t point to particular contract provisions, they’re making claims of “unjust enrichment,” arguing that it’s unfair for the schools to profit from services they didn’t provide.

Some of the suits are seeking compensation for what is known as “diminution of value,” or the difference between the worth of an on-campus education and one delivered online.

Depending on how courts view any disparity, the sums could surpass housing refunds. (Many students, however, pay far less than those published tuition prices because of scholarships.)

Still, courts have been reluctant to try to value one type of degree over another, according to Burgdorf. Another challenge: If judges don’t grant class-action status, most students wouldn’t find it worthwhile to pursue claims on their own.

Some students, like Cornell senior Joshua Zhu, haven’t signed on to a lawsuit but are cheering from the sidelines and could ultimately benefit. The 22-year-old information science major is logging on to classes from an off-campus apartment in Ithaca, New York, where he battles spotty Wi-Fi and misses working in an artificial intelligence lab.

“The tuition we paid to come to Cornell was with the expectation that we would have in-person classes and everything that came along with that,” Zhu said. “It almost seems like a breach of contract.”

Source: The Economic Times, May 2, 2020

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