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NZ language sector stymied by fee protection

High tuition protection costs are seriously hampering growth in New Zealand language schools, with some claiming that they must put aside up to 50% over what they take in revenue to meet government requirements.

“Students can still come and their fees will be safe, but the sector will shrink down"

Language schools complain that as a minimum, New Zealand Qualifications Authority (NZQA) requires them to protect “gross fees” – the full overseas retail price of courses – while they only receive net fees, which excludes agent commission.

“We are topping up trust accounts by 25% over what we receive. It’s crazy.”

“Fee protection is vital, yet if average commission is 20%, we are topping up trust accounts by 25% over what we receive,” Darren Conway, CEO of English New Zealand told The PIE News from Christchurch. “It’s crazy, particularly given the almost non-existent rate of failure where language school students have been left out of pocket due to school failure in NZ in the last five years.”

James Upton, director of Nelson English School, Nelson, agreed that fee protection was important. Yet with an average student roll of 75, and net fees (including homestay costs) of $200,000, he has to put aside $237,500 in fee protection.

It can be worse, he added, as NZQA requires schools to estimate fee revenues in advance. “Roll numbers fluctuate…If you have a group of say 30 students coming in for two weeks, then this can spike up the maximum amount easily by another $20,000,” he said.

This is leaving less money for overseas marketing at a time when foreign enrolments are falling. Data from Education New Zealand released today shows foreign enrolments in New Zealand fell by 6% last year (5,933), due to the Christchurch Earthquake, ongoing financial crisis and an ineffective border policies. Private training establishments, including English language schools, were worst hit with enrolments down by 5,151.

Conway said that the fee protection policy was the most “costly and stringent” in the world. He added it was failing to meet its intended purpose of stopping “dodgy schools”.

“NZQA are essentially saying it is the most important element of risk management, since it means in effect that however dodgy an institution is, at least the student’s fees are safe. This has the effect of indemnifying both agents and students against bad choices.”

Foreign enrolments in New Zealand fell by 6% last year, with PTEs, including English schools, worst hit

Upton said schools were surviving because of New Zealand’s “low wages and rents”. In addition to fee protection he says has to cover the cost of interest on “tied-up” capital ($7,500 a year); NZQA audits ($14,000 over four years); internal costs to ensure compliancy ($5,000 per year); and Ministry of Education levies ($5,000 per year).

With goods and services tax of 15% ($150,000 per year), he was left with around $30,000-$50,000 per year to reinvest in the business.

“Students can still come and their fees will be safe, but the sector will shrink down,” he said. “The failure to understand every day commercial realities or even educational matters is scandalous.”

NZQA did not respond to a request for comment.

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