How do I set up student fee protection?

Fee protection options

NZQA's student fee protection policy allows a number of options to be used. These are detailed in part two of the student fee protection policy and include:

• trust accounts (standard or static)
• bank bonds
• insurance (student-based insurance or bonds)
• company or parent body guarantees
• deferred payment
• collaborative arrangements.

Private training establishments (PTEs) may use the option most suitable for their circumstances. They may also use more than one option as long as the fees of all students are covered. If your student fee protection mechanism is one of the following you will need to use an NZQA standard trust deed.

Standard Trust Deed
Standard Trust Deed - for chartered accountant and solicitor trustees
Guidance notes for PTEs and Trustees
Guidance notes for students
Static Trust Deed
A static trust is where an amount equal to the maximum liability the private training establishment (PTE) would have in a course closure event is held in trust. The static trust does not rely on student fees being paid into the trust account and there are no periodic drawdowns. (This arrangement is Option 2 (b) of the Student Fee Protection Policy.)
Static Trust Deed
Guidelines for the Calculation of the Entitled Student Amount
Guidance notes for PTEs and Trustees
Bank Bond Trust Deed
A bank bond is where the PTE arranges for a bank to cover the maximum liability the PTE would have in a course closure event. The bond arrangement must include a trust arrangement for the distribution of funds to students (as per Option 4 of the Student Fee Protection Policy).
Bank Bond Trust Deed
Guidelines for the Calculation of the Entitled Student Amount
Guidance notes for PTEs and Trustees
Providers needing to operate a trust account to comply with Section 236A(2) of the Education Act 1989 should refer to the attached Trustee's Memorandum of Understanding (MOU)
The Eight Day Trust Memorandum of Understanding
This is for PTEs who do not use a Standard or Static Trust for their full student fee protection, but are required to protect student fees under Section 236A(2) of the Education Act 1989.
Trustee's Memorandum of Undertaking Form and Guidelines
SFP Quarterly Reporting Timetable

Below is a list of contacts for suppliers of student fee protection arrangements. NZQA has approved these suppliers, but is not responsible for their products. Approval may be withdrawn if the product no longer meets the requirements of the student fee protection policy.

Student Fee Protection Supplier Contacts

Information to students

At a minimum, students should be advised:

• the amount of fees protected
• the type of fee protection arrangement in place
• people or organisations to contact if their course or PTE closes
• to attend meetings arranged for students affected by a closure
• to consult the NZQA website (www.nzqa.govt.nz).

Trust account issues

Cash flow

The student fee protection policy allows for up-front payments from the trustee to the PTE of $500 or 10 percent, whichever is the lesser amount, on day one. A further 15 percent of remaining payments is allowable on day nine. PTEs can structure the payment schedule to receive weekly, fortnightly or monthly payments in arrears.

GST

Payments from the trustee to the PTE can be treated as successive supplies for GST purposes, if the trust account is set up in a certain way. This enables PTEs to account for GST at the time payments are received from the trustee rather than when students are invoiced.

NZQA has structured the Standard Trust Deed to take advantage of the non-binding ruling made in relation to the Public Trust arrangement. PTEs are advised to seek professional advice if not using Public Trust or Perpetual Trust options.

Refund period

If a PTE uses an option other than a trust, it must still meet the eight-day refund period. The eight-day rule satisfies two purposes. First, it allows students to withdraw from a course without penalty (apart from a deduction of the lesser of $500 or 10 percent). Second, fee indemnification protects students who have made up-front payments for a course that subsequently closes.

International student issues

Agents' fees

Fee protection includes agents' fees. The amount of fees to be put in trust is the amount receipted by the PTE and advised to the New Zealand Immigration Service. This amount will be one of:

• the amount paid by the student to the PTE
• the amount paid by the student to an agent (if the student paid the PTE via an agent)
• the recommended retail price for the course (as long as it is not less than the amount paid by the agent or student to the PTE).

The recommended retail price may be more than the amount paid by the agent to the PTE. In that case, the PTE must top up the amount deposited into the trust account to ensure the recommended amount is in trust. The student must be advised of the amount covered.

Homestay fees

Homestay fees are also protected. Experience has shown that all money paid by students to a PTE is at risk in a closure. Unless the PTE is also the accommodation provider, monies paid by the student to the PTE for safe-keeping and passing on to a third party should not be treated as part of the PTE's operating funds.

Where a PTE transfers homestay monies to an accommodation company owned or controlled by the PTE, these monies must also be protected.

Code of Practice

Both NZQA's registration criteria and the Code of Practice require protection of student fees. The NZQA requirement relates to PTEs, whereas the Code of Practice relates to all providers delivering to international students. Therefore, it applies to schools, polytechnics, colleges of education and universities as well as PTEs.

NZQA requirements are more specific than Code of Practice requirements. Under an agreement with the Code of Practice administrator, PTEs that deliver courses to international students can meet the code's requirements by obtaining NZQA approval.

Sanctions for non-compliance

NZQA may take one or more approaches if a PTE does not comply with student fee protection. These include:

• reconsidering a PTE's audit decision. A PTE could also be subject to a special purpose audit at its expense. The review of the audit decision could also have cost implications for the annual fee
• imposing a specific condition on a PTE. This could range from limiting the number of students or sites, to not allowing further enrolments, or requiring a PTE to adopt a particular arrangement
• advising the Code of Practice administrator that the PTE does not comply with the Code of Practice. This could lead to cancellation of signatory status and a consequential inability to recruit overseas students (because the New Zealand Immigration Service will not grant visas)
• issuing a notice under section 237 of the Education Act 1989, which could ultimately lead to cancellation of registration
• issuing a compliance notice under section 255A of the Education Act 1989, requiring the PTE to do a particular thing in relation to its registration. A PTE that receives such a notice must comply with it within the time period specified. If the PTE does not comply, NZQA could immediately cancel its registration.

Page updated: 07 August 2007