Refund provisions for PTEs

This refund policy applies to Private Training Establishments (PTEs) where an international student withdraws within the first 10 working days from a course of study or training that is of three months or more.

Effective date of policy

The policy is effective from 20 June 2011.

Maximum percentage of refund

Based on actual costs incurred, the maximum percentage of the payment, or sum of any payments, a private training establishment (PTE) may retain is 25%.

Costs that can be claimed for deduction from the refund

• Tuition fees, including amounts for the export education levy, recruitment, marketing, agents’ commission, and overhead costs.
• Course-related payments, including examination fees, and the costs of books and uniforms.
• Administration fees, or registration fees, or both.
• ESOL (English for Speakers of Other Languages) support.
• Student services fees.
• Airport pickup.
• Insurance.
• Accommodation.

Providing proof

The PTE must be able to demonstrate, in order to deduct up to the maximum percentage, that it has incurred expenses under one or more of the types of costs listed above.

And the PTE also needs to be able to show that those costs add up to the amount (equal or more than) the amount the PTE is seeking to retain.

Links to the Act and Gazette notice

The change is part of the Education Amendment Act (No 3) 2010.

For details of the Gazette notice, go to the Department of Internal Affairs website.

Questions and answers

What if a student withdraws before the course starts, or after the first 10 working days?

The policy sets legal requirements for refunds which apply in particular circumstances. PTEs are expected to develop, and make available to all students, their own refund policies which will have to include these legal requirements but will also cover all other circumstances. .

Although the policy stipulates the maximum percentage of fees that a PTE can retain, it does not mean that PTEs can automatically retain the maximum. The policy requires PTEs to only retain the fees that are reasonable to cover the expenses already incurred when a student withdraws within the stipulated period.

Outside this period, it is up to PTEs to determine, through their own refund policies, how a refund should be handled. It is expected that PTEs will be reasonable. For example, if a student withdraws long before a course starts, the retention should be much lower than if a student withdraws after a course starts. If a student withdraws after the stipulated 10 working days under exceptional circumstances such as sudden illness, death of the student or a close relative, PTEs are expected to be compassionate in the application of their own refund policy.

What is meant by "..based on actual expenses incurred.." and what evidence will PTEs be required to provide?

"based on actual expenses incurred" is a requirement to ensure the fees retained are justified by actual costs incurred as a result of the withdrawal.

PTEs should keep a good accounting system which makes clear how the calculation of costs incurred has been arrived at when a student withdraws. PTEs need to be prepared to explain to students the basis for reductions from the refund, and to provide evidence in support of its reductions if required by authorities. This is to ensure that reductions are transparent and reasonable.

Why are insurance and accommodation included in the basis for calculating reductions from the refund? What if a PTE does not receive money from students for either of these?

Some PTEs may have to pay a third party for insurance or accommodation and will be bound by their contracts with the third party. PTEs will need to be mindful of the refund rules when drawing up a contract with a third party so as to be able to provide evidence of actual costs incurred.

For PTEs which do not take any payments from students for insurance, accommodation or any other components listed above, the calculation of reductions from the refund would simply exclude these items.

Will NZQA issue a new Student Fee Protection policy as a result of this new notice?

No. The policy as it stands covers matters arising from this new notice.

Background

Reports from export education providers since April 2008 suggested that there had been a surge in international students changing course and/or provider, particularly in the private training establishment (PTE) sector. This undermined some providers’ efforts in marketing offshore, channelled students into low-level and cheaper courses which may not be of high-quality, and attracted non bona fide students.

This situation was particularly pronounced for PTEs as a consequence of Section 236(A) of the Education Act 1989 (the Act), which enabled any student at a PTE to obtain almost a full refund of payments associated with a course of over three months duration, minus ten percent of the amount or $500 (whichever is lower), provided the student withdrew within the first seven days of the course commencing.

The export education sector considered this as damaging to New Zealand’s reputation and the sustainability of the sector, and called for government policy changes to restrict international students from changing provider.

The Department of Labour has implemented changes to immigration policy and processes, which would only allow bona fide international students to change course and/or provider.

The Ministry of Education has worked with the New Zealand Qualifications Authority to amend the PTE refund provisions in the Education Act 1989. As a result of the Education Amendment Act 2010 (No 3), the Minister for Tertiary Education has been empowered to set refund provisions for such courses through a notice in New Zealand Gazette.

This policy is intended to allow PTEs to retain a higher percentage of fees paid when an international student withdraws from a course of more than three months duration, so as to more fairly compensate PTEs for the actual losses incurred and reduce financial incentives for international students to change provider.