October 5, 2016
Education Minister Simon Birmingham will today move to shut the rort-ridden VET FEE-HELP student loans scheme that has ransacked more than $6 billion from the public purse in four years.
It will be replaced with a new program with 22 measures limiting access to only credible colleges and legitimate students, and restricting the size of loans.
Announcing the new Vocational Education and Training Students Loans program, Senator Birmingham said it would “return integrity to the vocational education sector” by providing a range of safeguards.
Under the new scheme, loan limits will be set, only courses that align with industry needs will be eligible, existing providers will need to prove their bona fides, and barriers to new providers will be set much higher.
The scheme will grant TAFEs automatic entry into the scheme but will force all private colleges to apply under the new conditions “to weed out unscrupulous providers who have plagued the VET FEE-HELP scheme”.
The VET FEE-HELP scheme was set up by Labor in 2012 and was initially open only to private colleges and TAFEs that had established pathways into university courses. A decision to allow access to the scheme to all private providers and all courses opened the floodgates as loans blew out from $325 million in 2012 to $2.9bn in 2015.
“Student numbers jumped by almost 400 per cent, fees more than doubled and loans increased by 792 per cent,” Senator Birmingham said.
If legislation passes the Senate, the new VET Student Loans program will start on January 1. The 144,000 students with existing VET FEE-HELP loans will be grandfathered to the end of 2017.
Under VET FEE-HELP, students could access almost $100,000 of government-backed loans to study courses in anything from shamanism to business, with students repaying only once they earned more than $54,000 a year.
However, as revealed in a long-running investigation by The Australian, unscrupulous providers targeted vulnerable students with little chance of completing courses and often unaware they were enrolled. Thousands have been left with useless qualifications and large debts. Education Department figures revealed indigenous borrowers racked up average debts of $20,000, 40 per cent higher than non-indigenous students. While enrolments in VET FEE-HELP eligible courses rose by 135 per cent a year, the rate for indigenous communities was 650 per cent. With lax regulation and an asleep-at-the-wheel bureaucracy, the Australian Competition and Consumer Commission started taking action against the most voracious colleges last year.
The ACCC alleged one provider, Cornerstone Investments, engaged in misleading and unconscionable conduct when selling courses to vulnerable people in remote communities.
The college enrolled 4000 students in 2014. Just five graduated. Private colleges were also found to be charging $14,000 for courses that could be undertaken at TAFEs for $3900.
The new rules will forbid colleges from using brokers or third parties to recruit students.
Borrowing from Labor’s election promise to limit loans to $8000, the changes announced today will cap loans at three levels — $5000, $10,000 and $15,000 — depending on the cost of delivery.
A compulsory review will be held after 12 months of the new scheme with the minister able to change the loan caps at any time during the first year.