SUBMISSION TO THE WEST REVIEW OF HIGHER EDUCATION ON THE REGULATION OF ON-SHORE INTERNATIONAL STUDENT AGENTS
Prepared by
Campus Management Services Pty Ltd.
14th May, 1997
This submission seeks a recommendation from the West Review of Higher Education for a formal structure to be created to oversee and regulate the activities of international student agents who are based in, and conduct business within, Australia.
The submission further recommends that no review of the on-shore market can be made without reference to the significantly larger and more influential off-shore agent market.
The submission details the nature of the international student agent market, the importance of a regulated and transparent student recruitment system and provides recommendations on how this can be achieved.
Outcomes sought from a formal review of the on-shore international student agent market.
That all on-shore agents be required to be registered as a company under the terms of the Australian Securities Commission.
That an authority, or central agent register, be created that will be given the power to stop any agent breaching its rules from acting as a registered agent.
That all such companies acting as international student agents submit details of their business operations to a central agent register.
That all agent companies offering services to students publish a schedule of fees for services related to acting as a student representative.
That all commission structures be available for view by prospective clients.
That all agents agree to an enforceable industry Code of Ethics.
That any agent breaching that Code of Ethics be removed from the agent register.
That an agent found to be discounting any institutions published schedule of fees by rebating commissions be removed from the register.
That proven agent misrepresentation lead to removal from the proposed register.
Summary of the influence of the on-shore and off-shore international student agent on the Australian education system.
Locally based student agents are a mature and influential force in the movement into, and around, the Australian educational system.
Agents receive financial reward from the educational institutions for facilitating this service which has the propensity to place the best interests of the international student in doubt.
The local agent market is completely unregulated and no code of conduct exists.
Agents commissions are hidden from the student, who is unaware that advice provided by the agent may be significantly influenced by commissions paid by different institutions.
Ancillary charges to students, where no published industry scale exists, are hidden.
Educational institutions rely on agents for a large percentage of their international student intake.
There is great pressure on the education system, particularly universities, to increase income from the international student market.
The fundamental growth in the Australian overseas student market is fuelled by demand from the emerging affluence of the Asian middle class; their desire to educate their children abroad; the quality and reputation of the Australian education product; the inability of many countries around the world to provide a high quality education to their own students; and the efforts of authorities such as Austrade, IDP and the Australian International Education Foundation.
While influential in the selection of an individual institution, the agent has a relatively lower influence in the selection of Australia as the study destination.
There is a growing problem that relates the growth in the full fee paying international student market to the ability of this industry to create change in regulation - this is particularly the case at the agent level.
Definition of an international student agent.
A student agent is a person, persons or registered company whose principle business is to facilitate movement of international students to, or between, educational institutions in the ELICOS, secondary, vocational and higher education sectors of the Australian education system.
In the case of on-shore agents the agent resides in Australia and will seek to recruit students from the local Australian market (students who are already studying in Australia) or to recruit new students from their home country.
The primary objective of this facilitating role is to gain financial reward for the successful placement of a full fee paying international student.
The agent may receive remuneration from either, or both, the student and the institution.
The agent may offer, either free or for an additional fee, ancillary services related to living and studying in Australia.
These services may include one or more of the following:-
Agents are seen by students and their parents as the authority on Australian educational options and in many cases act as a defacto parent where a parent or family member does not live in Australia.
Agents are selected by introduction, word of mouth or advertising and many students now believe that it is obligatory that they apply to an institution through an agent.
Profile of the on-shore international student recruitment agent
The local agent is likely to be a student, permanent resident or citizen of Australia but born overseas. He or she is likely to have been educated in Australia and be fluent in one or more foreign languages.
The agent is usually well connected in their home country and will normally restrict their activities to that home country or locally residing nationals. This may expand where there is a commonality of culture or language (such as Chinese) or where the company is large enough to hire in staff from another culture.
There is no doubt that an international student is more comfortable dealing with someone from their own culture, in their own language, particularly when the student has poor English skills and where they are unfamiliar with local customs etc.
Agents fall into three main categories:-
The established, reputable agent who has been in business for many years, who is respected within their local community and who is well regarded by the institutions. They are full service agents who are available to their "clients" 24 hours a day and who are trusted by the student’s family to hold and spend large amounts of money on their behalf.
The agent for whom international students is a sideline to their main business which is likely to be in the travel, import/export or immigration areas and where students are more of a commodity.
The opportunist agent who is simply looking to be a facillitator. This style of agent is commission or fee driven and tends to have an appeal to students who are looking at the next stage of their education (i.e. moving from TAFE to university) and who is looking for the agent who can provide the best deal.
In all cases the agent expects a fee from the institution into which the student is successfully placed.
Some local agents are branch offices of an overseas, home country organisation. While these offices may provide on-shore services for students recruited off-shore, some have recognised that they can pick up additional commissions from in-country students moving between institutions.
There is significant loyalty between student and agent and the agent may gain multiple commissions or fees as the student progresses from ELICOS to secondary, post-secondary and higher studies.
On average most universities pay a flat 10% of one year’s student fees up front, (IDP is 7.5%). Commission levels may increase to between 12.5% and 15% where the institution finds it more difficult to successfully compete for students. This supports the contention that agents "rebates" do exist. The private provider (20% commission) and ELICOS (25%+ commission) markets are considerably more competitive.
An agent will seek wherever possible to pick up multiple commissions throughout the student’s study life in Australia and it is not inconceivable that four or more separate commissions are paid if a student is manipulated.
Services for which agents may charge international students.
The principal source of revenue for agents is a commission from the institution into which the student is placed. With fees generally in the $10,000 to $14,000 per annum range this represents a minimum of $1,000 per placement and could be as high as $2,100.
Agents may also receive a retainer or other inducements such as marketing support depending on their relationship with the institution.
The amount of commission received from the institution is not disclosed to the student and part may be returned by way of discounted tuition fees to secure the student’s business.
This is extremely damaging to the reputation of the institution, in the home market or abroad, as it makes them look desperate to buy the student’s enrolment.
Agents may charge a student an application fee which could be upwards from $150 simply to make applications on the student’s behalf.
Agents may charge a fee for facilitating visa renewal, passport renewal, accommodation placement, management of funds, or general counselling.
Regulations affecting on-shore international student agents.
The total number of agents operating in Australia is unknown but is unlikely to be less than 250. There is no Australia wide register of international student agents. There are at least 160 agents operating in Sydney of which very few are professional.
There is no local regulatory body responsible for the student agent market and it operates in a complete free market environment.
There is no requirement from The Department of Employment, Education, Training and Youth Affairs; The Department of Immigration and Multicultural Affairs or The Australian Vice-Chancellor’s Committee for agents to be regulated, with the responsibility for management of agent efficacy lying with the individual institutions who retain their services.
Agents are not required to demonstrate financial or pastoral responsibility in relation to the students they represent.
Agents are not required to disclose to students the financial relationships they have with institutions.
Agents are not required to disclose to institutions any ancillary fees they charge to students.
Agents fees pertaining to any service that they provide to students that fall into the wider area of international student support are not required to be published, nor is there any advocate specifically for international students in the case of a dispute with an agent. Students seeking redress from an agent must use the existing Australian legal system which is both expensive and difficult to understand.
Legal contracts between agent and student can be drawn without the student having access to legal representation.
All universities, TAFE colleges and some private providers and independent ELICOS providers do provide free counselling services and access to legal advice but there is no protective mechanism prior to a student agreeing to an agent’s charges.
There is no code of conduct committing agents to any standards of best practice nor is there any formal industry association to oversee individual behaviour. There is a group of agents in Queensland working towards creating an association but this is an informal structure at this time.
The size of the on-shore visa market and the value to local international student agents.
IDP Education Australia reports that in the 1995/96 year almost 45,000 international student visas were issued within Australia. This represents a growth of approximately 10% over 1994/95. "In light of the fact that student visas have for some years been issued overseas for the entire length of the course to be undertaken by the student, these figures indicate that there is a sizeable pool of international students moving from one institution/course to another within Australia."
Against an average fee structure of 10,533 per annum and a commission rate of 10% institutions will pay an average of $1,053 per student per annum.
If only 50% of these students have utilised an on-shore agent the amount of commissions paid will be $23.7 million per year.
It should be noted that these 45,000 students represent a total of $473.9 million to the Australian education system in fee income.
These students are already in Australia and a commission is most likely to have already been paid by the original institution that recruited them into the country.
This is an enormous market, and, being unregulated, is susceptible to manipulation and may subordinate the student’s best interests to the financial interest of the agent.
The size, structure and value to off-shore agents of the Australian education market.
According to the soon to be published figures by the International Division of DEETYA there were 143,000 international students in Australia in 1996. Although growth in student visas issued off-shore for the first quarter of 1997 has diminished there were 16,450 issued between January and March of this year. This figure does not include 722 visas issued to AusAID students.
These figures are broken out into Higher Education & Secondary, ELICOS and Post Secondary.
Higher Education & Secondary
There were 7,674 visas issued off-shore in this category.
Based on an average fee structure of $9,823 per annum and an average commission rate of 10%, universities and schools pay formal agent commissions of $982 per student to off-shore agents.
Presuming that only 50% of these students come via an agent the total expenditure on commissions for students recruited in the first quarter only represents $3.8 million.
ELICOS
There were 6,175 visas issued off-shore in this category.
Based on an average fee structure of $7,350 per annum and an average commission rate of 25%, ELICOS centres pay formal agent commissions of $1838 per students to off-shore agents.
Presuming that only 50% of these students are introduced via an agent the total expenditure on commissions for students recruited in the first quarter only represents $5.7 million.
Other Post Secondary
There were 2,603 visas issued off-shore in this category.
Based on an average fee structure of $8,533 per annum and an average commission rate of 20% post secondary institutions pay formal commissions of $1,706 per student to off-shore agents.
Presuming that only 50% of these students are introduced via an agent the total expenditure on commissions for students recruited in the first quarter only represents $2.2 million.
Total Commissions Paid
Therefore total commissions paid to off-shore agents in the first quarter of 1997 represents $11.7 million.
Total Cost of Commissions Per Annum.
Given the accuracy of the on-shore visas issued each year, and presuming that the number of visas issued in each educational category for off-shore visas issued remains roughly the same, the total expenditure on commissions by educational institutions is approximately $70.5 million per annum.
N.B. All figures based on IDP estimated student numbers and IDP estimated average course costs (Overseas Student Statistics, IDP 1996)
The Export Market Development Grant.
The Australian Government provides funding to Australian institutions and registered private providers via Austrade. The Export Market Development Grant allows institutions to claim back up to 50% of off-shore marketing expenditure which is directly related to the promotion of the institution and recruitment of international students. If the cost of retainers and commissions is claimed as an EMDG expense the rebate on commissions could be as high as $23.4 million per annum - all funded by the taxpayer.
This figure does not include rebates on travel, accommodation, exhibition fees, printed and audio-visual materials and entertainment.
Why Campus Management Services seeks a recommendation from The West Committee.
Campus Management Services is a private company, based in Australia and 100% Australian owned, which has been granted the management contract for the Sydney and Melbourne based campuses of Central Queensland University.
The Sydney International Campus and the Melbourne International Campus cater specifically to international students. Campus Management Services receives no funding from the university and the company is responsible for the local recruitment of international students.
Campus Management Services has a strong reliance on international student agents and during it’s constant dealings with local agents over the last three years has become aware that the lack of industry regulation is detrimental to both the international students and educational institution.
The issue of commission paid to agents by Universities, Private Providers, Secondary Schools and ELICOS colleges is substantial. Campus Management Services estimates that the sector paid $70.5 million in commission on 1996.
It also contends that none of the commissions were disclosed to the student by the agent or by the relevant institution. Therefore, the question of "hidden" commissions exists.