The warning that could have saved Australia from a multi-billion dollar loans fiasco

Jul 18, 2016  |  News  |  by The Learning Press staff
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Billions of taxpayer dollars were lost from federal coffers because two successive governments ignored a warning four years ago about the weaknesses of vocational education laws. 

The Australian Financial Review has revealed a Department of Industry, Innovation, Science, Research and Tertiary Education report told the Gillard Government in 2012 that it lacked the power to stop colleges abusing the VET FEE-HELP student loan scheme.

The regulatory impact statement, part of the redesign of the scheme, said: "Complaints to the government have identified instances where people with disability have been targeted for enrolment or gifts have been offered to students as an incentive to enrol in courses where VET FEE-HELP is available." 
It continued: "There are currently no legislative provisions to enable the government to deter or stop such actions from occurring once it has been identified."

The warning went unheeded and over the next three years, a number of colleges currently under investigation by the Australian Competition and Consumer Commission offered inducements such as free laptops to enrol students palpably unsuitable for courses. 

Disabled and disadvantaged students were often targeted in recruitment drives, most of whom were unlikely to ever complete their studies or pay back their loans.

It was not until the end of 2014 that Tony Abbott’s then assistant education minister, Simon Birmingham, stopped the use of enrolment incentives.

And not until January 2016 that laws were passed closing the loophole which allowed colleges to reap payment for student tuition even if students did not complete their courses.
VET FEE-HELP funding, like the university HECS scheme, is paid by the federal government as a loan which students begin to repay once their post-study income reaches $54,000.

The number of students using the scheme exploded from 50,000 in 2012 to 270,000 by 2015 as private colleges exploited the system’s weaknesses to drive recruitment.

At the same time, because colleges increased their fees, the cost to the government blew out nearly ten-fold from $325 million in 2012 to $3 billion in 2015. 

In a submission to the Government’s current review of vocational education, the Mitchell Institute’s Professor Peter Noonan identifies the “extent to which the problems with VET FEE-HELP should have been identified, risk assessed and managed far earlier than they were" as a key issue.

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