Politics Analysis

Capping student visas to curb net migration could create chaos

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The Federal Government is considering capping student visas to manage migration (Image via Swapan Basu | Flickr)

There has been much discussion in the media that the Government will cap student visas to bring down net migration to the 250,000 in 2024-25 promised by the Prime Minister.

But how would that work and is it the best way to manage the overseas student program after the massive and unsustainable increase in student visa refusal rates of recent months?

In 2023-24, overseas students contributed over 50%, or 263,750, to net migration of 528,420. While the forecast net migration in 2023-24 is 375,000, that is unlikely to be achieved with net migration in 2023-24 likely to be well over 400,000 and the overseas student contribution likely over 200,000.

Getting net migration down to 250,000 in 2024-25 will require a significant reduction in the student contribution of net migration, possibly to around 100,000 or less, as well as cuts in other areas such as working holidaymakers. Inevitably, that means further tightening of student visa policy and further pain for the international education industry.

Capping powers in the Migration Act

Section 85 of the Migration Act enables the minister to cap the annual number of visas issued under most visa classes.

It states:

...the Minister may, by legislative instrument, determine the maximum number of:

          (a)  the visas (including protection visas) of a specified class; or

          (b)  the visas (including protection visas) of specified classes;

that may be granted in a specified financial year.

The reference to a specified visa class or classes includes visa sub-classes such as visa subclass 500 which covers all types of student visas, onshore and offshore, other than student guardian visas. As far as I am aware, there is no scope for the minister to take a more granular approach to s85 capping than individual sub-classes.

As part of “visa simplification”, the former Government merged all student visa subclasses that were previously divided up by the education sector into one subclass.  

Thus to cap student visas using s85 of the Migration Act, the minister would need to issue a legislative instrument that specifies the total number of student visas that could be issued in 2024-25. The instrument can be issued at any time during the financial year as long as the specified number has not been reached.

As soon as the minister issued such an instrument, there would be an almighty surge in student visa applications as education providers and education agents seek to get students approved before the cap is reached. Inevitably, a large number of student visa applications would not be granted and would need to wait until more places became available in the following financial year.

The situation would be chaotic as many offshore students who were enrolled in a course starting in the 2025 academic year would not be able to enter Australia. Many onshore student applicants would be granted a bridging visa until their student visa application could be granted in a subsequent financial year. The bridging visa backlog is already growing strongly again after it was reduced from the peak of over 375,000 in the first half of 2022.  

The ongoing tightening of the onshore student visa policy will also increase the attractiveness of applying for a protection visa for students — there is already some evidence this is happening and may accelerate as the visa validity of current COVID visa holders expires during the rest of 2024.

There would be a massive workload/resource impact on the Department of Home Affairs (DHA), education providers and prospective students to manage the chaos.

Because of the education provider risk rating system, student visa applications from low-risk providers (mainly top-tier universities) would have their student visa applications processed more quickly while those of most other providers (around 1,400) would be caught by the cap.

Many of the latter providers would be under pressure to refund tuition fees paid by students whose visas remained unprocessed. Their financial situation would become so dire that they would need to lay off staff and/or face closure.

Some high-risk rated providers would survive into 2025-26 with existing students but not much beyond that noting the Government’s long-term plan to bring net migration down to 235,000 per annum while at the same time accommodating several new visa initiatives and visa changes that will continue to put upwards pressure on net migration.

In other words, the financial situation of high-risk rated providers will continue to deteriorate with little time for them to improve their risk rating while the student visa cap and the new genuine student requirement hit them hard.

This is the combined consequence of the Coalition Government putting in place measures to massively accelerate growth in student visas and the Labor Government responding to that much too slowly.

Capping Confirmation of Enrolments (COEs)

Another way to cap overseas student numbers would be to limit the number of Confirmations of Enrolment (COEs) that education providers can issue. COEs must be issued by education providers before a student visa application can be lodged.

Three immediate issues arise with such an approach.

First, there is a question of whether the Education Services for Overseas Students (ESOS) Act that creates the legal basis for COEs gives the Government sufficient power to cap COEs.

The ESOS Act was never designed for such a purpose. Legislative or regulatory change may be needed to properly cap COEs in a way that can withstand legal challenge. Given how hard capping would hit the Industry, the possibility of legal challenge is high.

Second, the Government would need to decide the total number of COEs it will allow in 2024-25. I suspect the overall COE cap would need to be around 50% of the number of COEs issued in 2022-23, possibly even less. That will create massive anger in the industry.

Moreover, as with capping student visas, there would be a massive surge in COEs issued by education providers to get in before the cap is reached. The COE cap would likely be reached very early in the financial year with no more student recruitment allowed after that.

Third, to avoid a massive surge in COEs issued, the Government may decide that it needs to determine a COE allocation in 2024-25 for each of the 1,400 registered education providers.

There are many ways this might be done. The simplest would be to cut the number of successful COEs issued in 2022-23 (COEs that converted to a student visa grant) by each provider by the size of the overall cut for 2024-25.

But treating top-tier universities such as Sydney and Melbourne in the same way as lower-tier providers would create a furore amongst these powerful institutions. The Government may look for an approach that tempered the impact on top-tier providers to avoid the political fallout. That would mean even bigger cuts to COE allocations for lower-tier providers, including regional providers. Many of these would go out of business even faster (which is inevitable if net migration is to be reduced significantly no matter what method is used).

The most bizarre aspect of any plan to cap the number of COEs each provider can issue is that the Government would each year effectively need to determine the number of customers each organisation/business could have. No one would think that is a sustainable way to manage any industry.

As is the case in Canada, capping COEs could only be a short-term measure until the Government works out a long-term and more sustainable policy. The Canadian Government has given itself two years to do that whilst dumping the responsibility for determining allocations to individual providers onto the Canadian provinces. Australian states would have little interest in taking on such an unenviable role.

Is there a better way?

In getting net migration down to the long-term forecast of 235,000 per annum, it is inevitable the international education industry, as well as the many businesses that rely on it, will go through massive rationalisation and pain over the next few years. While that cannot be avoided, it is incumbent on the Government to find a more sustainable way to manage the industry.

There are perhaps four key objectives the Government needs to keep in mind in developing a more sustainable industry:

  • Overseas students will be crucial to filling key skill gaps, particularly in areas such as health/aged care, education, I.T., renewable industries and construction. It is essential that overseas students are encouraged to undertake courses in these areas rather than just courses that enable education providers to make easy profits.
  • The Government must make the recruitment of high-performing students a priority. This has to be explicit in the way student visa regulations are designed. Any new overseas student policy framework must reward education providers that attract the best students who undertake courses that will be in long-term demand.
  • Education providers in regional Australia must be given a reasonable opportunity to compete with the bigger institutions in metropolitan Australia (and not based on regional providers setting up campuses in Sydney and Melbourne).
  • The Government needs a highly responsive mechanism that achieves the above objectives while allowing it to manage overseas student numbers consistent with a long-term net migration target.

In my view, the best way to do this would be that at the time of application, students must demonstrate they achieved a minimum score in their domestic national university entrance exam (similar to an ATAR) as set by the Immigration Minister.

Student scores could be checked when they sit for a physical interview with an accredited English language testing (ELT) provider. ELT providers should scrutinise the official exam result document and contact the relevant national exam management agency to check scores. Protocols for this would need to be negotiated with each national agency by DHA. ELT providers are already required to check the identity of test sitters. DHA overseas posts could sample audit the work of ELT providers.

Post-study visas should only be available to students who complete a course leading to a qualification in a major skill shortage area. This would encourage students to choose education providers offering high-quality courses in these areas, minimise the risk of students ending up in immigration limbo and increase the chances of these students being sponsored by an Australian employer.

The Government should abolish risk rating individual education providers or determining caps for individual providers. That was always a mistake. The Government should only risk rate by education sector and source country. That would allow competition between all providers on a level playing field in each education sector.

The advantages of this approach include:

  • Rewards education providers who recruit the best students and offer courses in areas of major skill shortage.
  • Gets DHA out of managing individual providers. That is a job for regulators. DHA should focus on the extent to which students from each provider secure skilled jobs in relevant occupations.
  • Enables the Immigration Minister greater control over aggregate student numbers by increasing/reducing minimum university entrance score requirement as needed.
  • Reduces resource pressures on DHA, particularly overseas posts, as students with poor university entrance exam scores would no longer apply.
  • Reduces the risk of education providers who get very low COE allocations taking legal action against the Government.
  • Enables Australia to best use the overseas student program to address its skill needs (noting a different approach will be needed to attract students to undertake traditional trade courses).

Dr Abul Rizvi is an Independent Australia columnist and a former Deputy Secretary of the Department of Immigration. You can follow Abul on Twitter @RizviAbul.

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