A. Introduction - The Forum Process

The purpose of this discussion paper is to provide the participants in the Training Completion Assurance Fund (TCAF) Forum being held on December 10, 2001 with a background on the proposed TCAF initiative discussions to date, and a summary of the issues that have arisen during those discussions, as well as questions that can guide the discussions by the participants in their Forum breakout groups.

Following oral presentations at the outset of the Forum, participants will break into 6 facilitated discussion groups, where they will have the opportunity to discuss aspects of the TCAF initiative and prepare a report back to the whole Forum at the end of the day. Each group will be given one specific Forum theme to deal with in its entirety, and will be encouraged to discuss other themes, if time permits. The reports from the breakout groups will identify areas of consensus, areas of disagreement, and areas that may require further thought, research, or clarification.

At the conclusion of the Forum, participants will leave with a sense of the next steps in the TCAF initiative process. In addition, both a summary of the Forum proceedings and a full "As was said" report will be posted on the www.TCIF.org web site within days of the Forum, so that participants will have an additional opportunity to provide input upon further post Forum reflection.

B. Background

Over the past several years, there have been multiple sudden closures of private career colleges in the province of Ontario, impacting a significant number of students each year who have invested tuition fees, partially completed their programs of study, and wish to be able to finish the training they had contracted for with the institution that has closed.

To date, there has been a very informal, almost ad hoc, approach taken to try to ensure that students impacted by school closures were in fact trained out. As a result, students often were left with uncertainty for several days or even weeks as to the status of their train-out options. In the vast majority of cases, students have been trained out as a result of a very informal process of discussions between the Ministry, individual educational institutions, students, instructors, and bankruptcy trustees, often at considerable cost to the host train-out institutions. Therefore it would appear that consideration should be given to formalizing the train-out process to better protect the investment of students and help defray future out-of-pocket costs for train-out institutions.

In 2000, the Ontario Government approved legislation that would allow for the establishment of private universities in the province of Ontario, with the proviso that students at private universities would have their investment in their education protected against sudden closure of their private educational institution. To satisfy this condition, it is likely that the Government will demand that private universities be required to post consumer protection bonds in amounts equal to the institution's maximum unearned revenue exposure annually. The question has been raised AS TO WHETHER OR NOT this approach to bonding should be used for private career colleges as well.

In October of 2000, a group of approximately 25 private career college representatives met with Dianne Cunningham, Minister of Training, Colleges and Universities and several senior Ministry officials. At that time, several members of the Ontario Association of Career Colleges (OACC) made presentations on a variety of issues and concerns to the career college sector. In one of those presentations, OACC expressed its desire to establish an industry fund that could be used to ensure that students who are impacted by a school closure will be provided with a reasonable opportunity to complete their studies; thereby eliminating or significantly reducing the requirement to post consumer protection bonds.

In November of 2000, OACC and the ministry formed a joint working group which has worked together to research similar types of funds that exist for students in other jurisdictions, as well as similar funds that exist in other sectors such as the travel sector. The purpose of that research was to allow the working group to develop a framework and process for establishing a "made in Ontario" fund that will meet the objectives of all concerned.

In June of 2001, OACC members attending the annual general meeting held in London unanimously approved of the TCAF initiative in principle and gave the OACC Board of Directors authority to consult with the private career college industry as a whole as part of the development stage and prior to moving into an implementation stage. The TCAF Forum scheduled for December 10, 2001 is the initial step in that consultation process.

C. TCAF - A Concept

The concept of the Training Completion Assurance Fund (TCAF), as envisioned by the working group, would involve the establishment of a formal mechanism for those eligible educational institutions that choose to offer their students training completion protection, to contribute to an "Assurance" fund. Such a fund would have to be administered by some type of Governing body which would also be responsible for determining in a formal and timely manner, the most appropriate way to provide "train-out" services to all eligible students impacted by the sudden closure of a TCAF participating institution. One essential condition that forms the foundation of the TCAF concept is the reduction or elimination of bonding requirements for participating institutions.

In the case of a closure, the fund's Governing Body would need to immediately determine how many students are impacted, their programs of study, the amount of time left in their programs, the availability of train-out seats at other institutions, the amount of any outstanding tuition fees available, and in a timely manner communicate the situation to students and any other interested parties. If appropriate and necessary as part of the train-out plan, the Governing Body would be authorized to disburse funds to cover approved costs associated with a train-out.

There are four major themes associated with the TCAF concept that need to be considered and discussed by Forum participants. They are:

1. Purpose of the Fund

2. Financial Aspects Including Bonding

3. Governance and Participation

4. Marketing and Public Communications

The remaining sections of this discussion paper will provide Forum participants with a summary of the essence of the issues around the 4 major themes identified above for the Training Completion Assurance Fund, as well as the various options that have been considered to date.

D. Major Theme #1 - Purpose of the Fund

The purpose of this section of the paper is to provide the participants in the Training Completion Assurance Fund (TCAF) Forum with a summary of the issues regarding the purpose and use of the fund, as well as questions to guide the discussion in this area.

Over the past several years, there have been a number of sudden closures of private career colleges (PCC's) in Ontario where students were initially left without options to complete their training. Most often closures have been due to financial failure. The media has drawn public attention to these closures and they are of concern to the government and public at large. Closures where students are left unable to complete their training or not knowing what options are available have a negative impact on the private career college industry overall.

In Ontario, through the coordination efforts of the Private Vocational Schools Unit within the Ministry of Training, Colleges, and Universities, and the Ontario Association of Career Colleges, students impacted by school closures have generally been able to complete their training at another PCC. The industry as a whole has worked to respond quickly to help affected students. It has been acknowledged that the Manager of the PVS Unit has had a pivotal role in the complex networking of the various stakeholders that has resulted in the successful train-outs to date and there is belief that this role must continue in order to ensure that train-outs and the resources of TCAF can be utilized effectively, efficiently, and economically. Examples of this role include facilitating license acquisitions and sharing of information. For future success, it is critical that Government provide assurance that it will not develop and implement policies that will hurt train-outs such as barring access to licenses or student financial assistance.

Current bonding requirements and the process for accessing those funds are considered to be inadequate by the Ministry and many within the industry. One alternative is to raise substantially the size of bonds required by PCC's. Another is to reduce existing bonding requirements while at the same time having the PCC industry under OACC's leadership establish a train-out fund for students impacted by school closures. The TCAF is the proposed model for an industry self-regulated fund.

What is the purpose of the TCAF?

There are several options that could be considered for the use of the TCAF as follows:

1. Refund all monies to students affected by closures;
2. Refund prepaid tuition fees for services not rendered by the time of closure;
3. Act as the primary method of financing training completion for affected students;
4. Serve as the fall-back method to finance the completion of training when other methods cannot be implemented; and/or
5. Reimburse students who do not accept a train-out.

In discussion, one possible approach is to use the TCAF as a means of financing train-out of affected students ONLY AFTER all other methods have been exhausted. The TCAF Board and staff would coordinate the train-out of students from participating schools that are closed. The TCAF would not be utilized, except on an interim basis, for the following purposes:

1. To provide affected students with a full tuition refund;
2. To pay for the undelivered portion of the contracted service; or,
3. As the primary means of financing the full cost of train-out

There is at least one U.S. jurisdiction where the training completion fund has gone bankrupt when students impacted by closures have had too ready access to refunds or where the funds have been liberally used for training completion. In Ontario, the existing methods for providing students with assistance in order to complete their training have been effective. As such, it has been suggested that the TCAF should be used to supplement the existing approach in Ontario rather than to replace it.

Some concern has been raised that, knowing there is a fund in place, the Government might be less hesitant to close down a career college or take actions that could precipitate a "shut-down". The rationale is that Government will no longer have to worry about students being impacted by a closure because the fund is always there to "fix" matters.
Participation will be voluntary.

Questions for Discussion:

1. What should be the purpose of the Training Completion Assurance Fund?

2. What sort of situations should the TCAF cover?

3. What process should be used to assist students who are covered by the TCAF in case of closure?

4. How should the human and financial resources of the TCAF be used to assist students in the event of closure?

5. For participating institutions, are there certain types of closures that should not be covered?

6. What processes need to be in place in order to identify the students in need of a trainout, their course of study, their start date, their end date, and their finances?

7. Should the TCAF fund be used to assist students who are impacted by a school closure that results from a “shut-down” by Government?

8. What role, if any, should Government play in the train-out process?

E. Major Theme #2 - Financial Aspects Including Bonding

The purpose of this section of the paper is to provide the participants in the Training Completion Assurance Fund (TCAF) Forum with a summary of the issues regarding the financial aspects of the fund and the implications for bonding, as well as questions to guide the discussion in this area.

The research done by the working group has discovered the following information about student train-out funds in other jurisdictions and existing compensation funds utilized in other sectors.

It is reasonable to assume that in addition to the TCAF being responsible for collecting "Assurance" premiums to build up a fund that can cover the anticipated costs associated with student train-out activities, TCAF will also incur administrative and overhead costs.

In some jurisdictions, the premiums are paid by students as a percentage of their tuition, while in others the fund premiums are paid by the participating school.

It has been suggested that the total cost of TCAF and new levels of bonding premiums should be slightly or no higher than the current level of bonding premiums, keeping in mind that it is likely that bonding requirements will increase dramatically in the absence of a formal student train-out mechanism with substantial funding available. An example of how this could be accomplished is shown in the bonding and TCAF premium tables included with this paper. The rates in those tables allows for as much as a 75% reduction in bonding requirements.

This illustration also assumes that there would be a constant premium each year to cover administration costs, and a declining training completion Assurance premium that, assuming minimal "hits" to the fund, would decline each year until reaching zero. The highest Assurance premium in the tables is based on 15 cents per $1,000 of tuition.

In addition to a reduction in bonding levels, it has been suggested that having a combination of bonding and a student train-out fund in place should eliminate the need for Government to require expensive audited financial statements.

In some jurisdictions, similar funds have a cap on how high the fund can be built and participating institutions get a holiday from paying premiums once that level has been achieved or exceeded. In other jurisdictions, there is a limit on how much can be paid out of the fund in relation to any one closing.

For some funds, such as TICO in the travel industry, the member organizations are required to establish and use trust funds for any unearned revenues that they have received. It has been suggested that TCAF participants use trust funds for any unearned revenues they receive over 40% of tuition, for prepaid book fees, for prepaid certification exam fees, etc. The use of trust funds should help to minimize the payouts associated with a train-out.

Questions for discussion:

1. How high should the fund be built?

2. How quickly should the fund grow?

3. Who should pay the TCAF premiums (students or institutions)?

4. Should there be a limit on the amount of payout from the fund in respect to any one closing, or any one student?

5. Should bonding requirements be eliminated or reduced as a result of the implementation of TCAF?

6. Should there be a student-based premium for the train-out fund and an institution-based fee for the handling of administration and overhead costs?

7. How should TCAF premiums be collected (monthly, quarterly, or other)?

8. Should TCAF participants be required to use trust funds to manage unearned revenues? If so, how would this work?

9. Should there be an initial levy to kick-start the fund?

10. Should government be asked to "backstop" the fund in case early claims exhaust the fund?

11. Should the TCAF fund be entitled to submit a claim against the bonds of train-out students?

12. Are there other trade-offs other than bonding that the industry should negotiate for, in exchange for establishing a train-out fund?

13. What role, if any, should the government play in respect to the financing of TCAF?

F. Major Theme #3 - Governance and Participation 

The purpose of this section of the paper is to provide the participants in the TCAF Forum with a summary of the essence of the issues around the topics of Governance and Participation  for the Training Completion Assurance Fund, as well as the various options that have been considered to date.

Governance

It has been proposed that a non-profit organization be established to administer the Training Completion Assurance Fund which through the collection and disbursement of funds will provide protection to students by arranging for the completion of the program for which a student has contracted. Such an organization will need to have a governing body or Board that will oversee the operation of the fund.

Participants in the TCAF Forum will be asked to discuss a variety of issues around the governance of the fund including the nature, size, composition, and authority of the Board.

The development and implementation of the TCAF has been a private career college industry driven initiative from the start which has attracted the support of the Ministry of Training, Colleges, and Universities. As a result, the Ministry has taken the position that Government officials or representatives should not serve as members of the governing body of the fund. This has lead to one suggestion that the Governing Body be a Board of Directors consisting of 9 members as follows:

4 representatives from private career colleges that are OACC members
2 representatives from private career colleges which are non-OACC
1 representative from the financial profession
1 representative from the legal profession
1 student/graduate

Each of the career college representatives would be from participating schools in good standing with TCAF.

The Board could be composed of volunteers who are not compensated for their time, but are required to manage the administration of the fund or alternatively the board could have the authority to employ staff to administer the fund.

The Board could have the authority to set fees or impose special levies from time to time as it sees fit or alternatively the fees and special levies could be approved annually at an annual general meeting of the participating educational institutions.

The Board could have the authority to deny an educational institution participation in the fund for cause or alternatively all institutions could be automatically allowed to participate provided their TCAF fees are paid and current.

The Board could have additional authority to: Provide funds to complete training when a member school fails and other means to provide training cannot be put in place; Recover funds through the courts or other means; Keep the fees to the minimum required to ensure the short- and long-term viability of the TCAF; Maintain the viability of the fund; and Refund fees to students in such cases and in the amounts the Board may determine appropriate.

The responsibility and authority to design the ultimate framework, create the TCAF organization, draft by-laws establish the Board, and ensure that the fund commences its work based on direction given by Forum participants could be mandated to a steering group that evolves from the current OACC planning committee.

Once established the Board could become responsible for the development and implementation of policies in respect to the administration of the fund.

Participation

In regard to the participants in the fund, there are two distinct groups that should be considered to be participants in the fund -- educational institutions and students.

Participants in the Forum will be asked to discuss the types of institutions, students, and programs that should be covered under the terms of the TCAF.

While the Government is not prepared to insist that participation in the TCAF be mandatory, they have indicated that educational institutions that do not participate will face bonding requirements that are considerably higher than the current bonding requirements.

While it seems to be generally understood that students who have paid for their own tuition need to be protected under the terms of the TCAF, there is some question about whether or not students that are sponsored through third party agency funding need similar protection.

Questions for Discussion:

Governance

1. How many Directors should serve on the Governing Body of TCAF? What should be the composition of the Governing Body? How should the Directors be selected?

2. Should the TCAF organization be strictly volunteer or should the Board have the authority to engage staff to administer the fund?

3. What should the major areas of authority for the governing body?

4. Should a steering committee be formed to manage the process of developing the TCAF concept until a Board can be appointed? If so, how should steering committee members be chosen?

5. What role, if any, should the Government play in the governance of the fund?

Institutional Participants

1. Should participation in TCAF be limited to private career colleges that are currently regulated under provincial Act and regulations only? OR should TCAF be open to private universities or unregistered private training organizations, or private not-for-profit training organizations, or private elementary and secondary schools?

2. Should participation in TCAF be denied to educational institutions having an ownership that has previously owned another educational institution that had closed and had students access the TCAF fund for train-out purposes? If so, could such institutions be eligible for participation if arrangements are made to reimburse the fund for the cost incurred for any such previous train-out?

3. Should educational institutions that are both private career colleges regulated under the Act and Regulations, and private universities be allowed to participate in TCAF in respect to their diploma programs only, and not their degree programs?

Student Participants

1. If TCAF coverage is only provided to TCAF participating institutions in good standing, what happens to students enrolled at closed schools that are non-participating institutions or not in good standing?

2. Should students who are already part of the way through a program at a participating institution when the fund is first implemented be eligible for TCAF coverage as part of a grandfathering clause?

3. Should it be mandatory for all students who have paid their own tuition to have coverage under TCAF?

4. Should students who have had their tuition fully paid by a third party agency such as WSIB be eligible for TCAF coverage?

5. Should students enrolled in unregistered or certificate programs at a participating institution be eligible for coverage under TCAF

6. Should all students enrolled in registered programs at a participating institution be required to be covered under TCAF? or, should students be given the right to opt out?

7. Should students enrolled in degree programs at participating institutions be eligible for TCAF coverage?

8. Should international students enrolled at participating educational institutions be eligible or required to be covered under TCAF?

G. Major Theme #4 - Marketing and Public Communications

School closings affect all private career colleges as the media tells unfavourable stories about career colleges and warns students against them. The same thing happened in the travel industry years ago as various tour operators closed leaving many travelers stranded. The travel industry developed the TICO fund and advertised it heavily to the point that today even with the collapse of Canada 3000 travelers have been protected and the media treats the industry favourably. The Training Completion Fund in Ontario is being developed along the same lines as the TICO to protect Ontario's students attending career colleges and schools from adverse publicity.

This fund will provide both the industry and individual schools many marketing opportunities. Schools will be able to take advantage of logos, door stickers and utilization of the Web Site as a way to promote the safety of attending their schools.

The proposed launch of the Training Completion Fund in Ontario is January 2003. This fund is targeted to be launched after many committee meetings, discussions at the TCAF Forum on December 10, 2001 and Government consultation.

The Training Completion Assurance Fund has the basic objective of building public confidence in private education by promising students that no matter what happens to the private career college where they are enrolled the fund will guarantee the students' train out.

Questions for Discussion:

Marketing During Launch: Period (November 2002 to June 2003)

1. Who do we need to advertise to?

2. What should we be saying?

3. What materials should we have at our disposal & who will produce them?

4. Should each school do their own advertising or should there be a collective campaign? If so, how will participants pay for it? How big should the budget be and how should it be administered?

5. What is the role of Public Relations versus Advertising?

Pro-Active Marketing During Post Launch Period (Post June 2003)

6. What kind of sustaining marketing communications is needed?

7. What type of marketing tools will sustain the original launch materials?

8. How will participants pay for the sustaining marketing? How large should the budget be and how should it be administered?

9. Is Government participation in marketing activities required?

10. What will the role of Public Relations be? Should it be on-going? Should we be lobbying government?

Reactive Participation to a Closure

11. What should be done immediately after a school closure re notification of students, potential train out schools, Government and media relations?

12. How do we manage from a Public Relations and communications standpoint the media involved with a school closure? How will it be paid for (from the existing advertising/public relations budget or a special fund)?

13. What role, if any, should the Government play in the marketing of TCAF?