Politics Analysis

Student cap hysteria overblown

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(Image on left via Rawpixel and Screenshot of Prime Minister Albanese via YouTube)

Dr Abul Rizvi analyses the Government's new student visa caps and whether these will adequately address issues of sustainable growth, skill shortages and strengthening integrity.

MINISTERS CLARE, BURKE AND WATT have announced the student caps that will apply in 2025. These are apparently designed to deliver on multiple objectives but it is quite unclear why the Government considers capping is the best way to achieve these.

The Government’s objectives appear to be:

  • ensuring sustainable growth;
  • strengthening integrity; and
  • maintaining social license.

Sustainable growth

The Government frequently uses the words "sustainable growth" but does not define what this means. For example, what is the Government’s expected contribution of students to net migration in 2025 and beyond? Or at what rate does the Government expect the stock of students and temporary graduates to grow in 2025 and beyond? How will the skyrocketing number of temporary graduates be sustainably managed?

Its media release on student caps states that the Government:

..will set a National Planning Level (NPL) for new international student commencements of 270,000 for calendar year 2025. The NPL is divided between the higher education and vocational education and training (VET) sectors. This will bring the number of new international student commencements, across higher education and VET, back to pre-pandemic levels.

In announcing this National Planning Level (NPL), the Government appears to have changed the definition of a "new student commencement".

For the existing data series published by the Education Department, a "new student commencement" in any particular year is defined as:

'...a student in that year who has not appeared in any previous year of data collection.'

On the basis of this definition, new commencements in recent years are outlined in Table 1. This highlights the steady rise in new commencements until COVID and then the phenomenal increase in commencements in 2022 and 2023 leading to student and temporary graduate stocks hitting record levels in 2024.

Table 1: New Student Commencements – Existing Definition

Source: Australian Education International

But in a document circulated to international education providers, the definition of a "new overseas student commencement" or (NOSC), for NPL purposes, is:

'A student will count as a new commencement when they are onshore and start their first non-exempt course at their first provider, and each time a student changes into a non-exempt course at a different provider.'

The following courses and students are exempt from capping:

  • primary and secondary school students;
  • standalone ELICOS students;
  • higher degrees by research;
  • non-award courses;
  • government-sponsored students (both Australian and foreign government-sponsored);
  • Australian transnational twinning arrangements; and
  • students from the Pacific and Timor Leste.

This means that when a student enrols at an exempt provider, they will not be counted as a NOSC but will be counted when they start their first non-exempt course or when a student with a non-exempt provider changes to another non-exempt provider.

This development changes incentives significantly. Students who enrol in an ELICOS or non-award course will need to be very conscious of the number of NOSC places available at the university or VET college they wish to attend. Many such students will be forced to go to either a regional university (where there are now more places available compared to metropolitan universities) or to depart at the end of their ELICOS or non-award course.

Some may choose to apply for asylum as their best and cheapest way to extend their stay in Australia with work rights. Students applying for asylum are rising strongly.

This will make ELICOS and non-award courses much less attractive (even though they are uncapped) unless the student is just coming to Australia to do one of these courses only and then depart, which is a relatively small portion of the cohort.

Higher education and VET

With a cap on the number of NOSC places, the incentive for universities and VET colleges to retain existing students will intensify, as it appears the NOSC place of a departing student will not be replaced in the year the student leaves. This may have both positive and negative consequences. Universities and VET colleges offering a better student experience to retain students would be a positive. But it could also lead to even greater levels of "soft marking" to retain students.

For publicly funded universities, there will be a cap of 'around 145,000 new international student enrolments in 2025, which is around 2023 levels'.

In addition, other universities and non-university higher education providers will have their NOSC capped at around 30,000.

Thus, in total the Government is anticipating 175,000 NOSC in 2025 in the higher education sector (compared to 154,660 in 2023 under the old definition).

This figure appears to:

  • Exclude post-graduate research students. Under the old definition, postgraduate students may have been counted in the higher education total. This is not clear as there is no separate category for post-graduate students in the new commencements data.
  • Include students who move from one non-exempt provider to another in the same year as they were initially enrolled. That is, they could be counted twice as a new commencement whereas under the old definition, they were counted only once. This would include students who in 2025 start with one university and in the same year move to another university or to a VET college (or vice versa). 
  • Include students who move in 2025 from an exempt provider (eg Elicos or non-award) to a non-exempt provider. Under the old definition, these students had already been counted as "a new commencement" when they started their Elicos or non-award courses.

Because of the different definitions, it is difficult to compare the 175,000 capped higher education NOSC places with the 154,660 new higher education commencements in 2023, under the old definition. As we don’t know what the Government has assumed for new offshore student applications and grants or for students changing providers in 2025, it is not possible to know definitively whether the caps are reducing or increasing the number of new commencements under the old definition.

We do know that offshore student visa grants have fallen significantly since 2023, so the number of new commencements under the old definition in 2024 and most likely in 2025, will be significantly less than in 2023.

The uncertainty is around the assumption the Government has used for students moving from sector to sector. An indication of this is possible from past data on students moving between sectors (see Table 2).

Table 2: Students moving between education sectors

Source: DHA website; students reports

The two main sector movements that stand out in the first half of 2023 are from Elicos to VET and from Higher Education to VET. The VET sector relies extensively on recruiting students after they have arrived in Australia. Movement from VET to Higher Education fell away significantly in 2023.

If this means the Government has assumed a relatively small number of students moving onshore into the Higher Education sector in 2025, then the overall NOSC of 175,000 may, in fact, be quite generous. If offshore visa processing remains as tight in 2025 as in 2024, the Higher Education cap may not be achieved.

In the VET sector, the NOSC for 2025 is to be 95,000. This compares to 81,643 new VET student commencements in 2023. Offshore student visa applications and grants in the VET sector nose-dived from late 2023 onwards. This means that under the old definition, the VET sector in 2025 is highly unlikely to get anywhere near the 2023 level of 81,643 new commencements. It will need to make that up by intensifying onshore recruitment as it did in 2023.

Table 2 highlights the extent to which the VET sector recruits its students from onshore from other sectors. This is largely designed to bypass the scrutiny that is applied to offshore student applications.

Also relevant is the extent to which different sectors recruit from other visa holders onshore. In the six months to December 2023, 13,430 people on visitor visas secured a student visa. Of these, 8,708 were recruited to the VET sector, 2,611 to Higher Education and 1,508 to Elicos. Note that after 1 July 2024, visitor visa holders could no longer apply for a student visa onshore.

It is thus quite possible the VET sector may also struggle to meet its NOSC in 2025. It’s difficult to see how this is a "slashing" of international student numbers as some media is reporting.

The key will be what happens to student visa applications and processing. The recent media announcement states that 'Ministerial Direction 107 ' on risk rating of providers, will be replaced is significant. But we don’t know what it will be replaced with. Some form of risk rating system will remain, as has been the case since the early 1990s. How visa processing integrates with the caps (and with the Treasury’s forecast of net migration) will have to be resolved.

Strengthening integrity

The Government seems concerned that the portion of international versus domestic students at Group of Eight universities, in particular, has grown too high and that smaller regional universities have not been able to access as many international students (perhaps an equity objective). There is a similar concern that some private providers overwhelmingly cater for international students and that this impacts negatively on both the domestic and international student experience and the quality of education delivered. 

This is a reasonable concern although it would be good to see robust research on this (some universities may have already done such research but the writer is not aware of it). The question is whether capping is the best way to address this, given it is at the individual class level that this may really matter. For example, a university could be below the cap in terms of the portion of international students at the university as a whole but may have classes in some subjects that are dominated by international students.

This issue really goes to the quality of education being provided and would be better managed by the two quality regulators drawing on the research (which the regulators themselves could commission), rather than caps. This could allow a more nuanced approach than Government each year setting caps for each provider.

On the question of equity between metro and regional providers, differential capping is not the best way to approach this. The starting point should be to remove the risk rating of different providers, which has left Group of Eight universities with a very low risk rating (and thus a huge recruiting advantage), and regional universities with a high-risk rating. Allowing all universities to compete on a level playing field would be a better start than differential caps. This is especially the case given the reliance of the risk rating system on refusal rates, which leads to a high risk rating which then leads to high refusal rates.

Social license

The rapid and unplanned growth of net overseas migration between 2022 and 2024 to record levels, driven largely by a surge in overseas students associated with COVID and pre-COVID era policies, led to significant concerns in the public that immigration was not being managed in the national interest. While some politicians took advantage of this in a manner that undermined social cohesion, the large surge in net migration did have genuinely negative impacts in terms of housing, infrastructure and service delivery.

From an immigration policy perspective, the risk is that the surge has created a growing cohort of people, particularly students and temporary graduates, who may end up in immigration limbo. People who have invested significantly in the opportunity to secure permanent residence, but are unable to secure a skilled job that leads to employer sponsorship or that there simply aren’t enough places in the permanent migration program. The number of temporary graduates in Australia is now well over 200,000 and rising rapidly.

But it is not clear that student caps, with the Government each year telling each provider how many new students they can have, is the best way to manage this. A better approach would be to use university entrance exam scores and/or tailored aptitude tests, such as those used by top universities in the USA, to determine who is recruited. The minimum score could be set by the Government to manage volumes. In addition, temporary graduate visas should only be available to students who have completed a high-quality qualification in an area of long-term skill need.

What is abundantly clear is that caps are a poor policy tool and the Government should go back to the drawing board on this.

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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