VET FEE-HELP reforms will merely paper over the cracks of a system prone to abuse

Education Minister Simon Birmingham has foreshadowed further major changes to the troubled VET FEE-HELP loan scheme to rein in costs and tackle widespread abuse by unscrupulous providers.

But will these changes fix the problem? Or will they merely paper over the cracks of a system that is prone to abuse?

What’s the problem?

Since VET FEE-HELP was expanded in 2012 there have been significant abuses of the scheme by providers inappropriately enrolling thousands of students at excessive fees, with little prospect of these students being able to repay the debt they accrue.

In 2015 the government introduced some changes to the scheme to stop inappropriate and unethical marketing and inducements, and cap the level of revenue for each provider.

Prior to the federal election, the government released an options paper on the future of VET FEE-HELP. This looked at further reform options to take effect in 2017. The government has been considering submissions in response to the options paper and undertaking consultations prior to making these changes.

In his recent announcement, Birmingham did not discuss the details of the changes, but gave a strong indication of this thinking. He argued:

• People with little history in training in a certain field of study and limited or no employer support for their outcomes shouldn’t be enjoying taxpayer support to deliver such training.

• Appallingly low student progression and completion rates are not acceptable and should not be at all tolerated.

• Massive fee hikes, well above any reasonable cost of delivery, should raise red flags.

• Experience now tells us that if there are obscenely high ramp-ups in enrolments then the likelihood is something questionable is going on.

Birmingham has also foreshadowed the potential introduction of loan caps under VET FEE-HELP for specific qualifications. The level of the cap would vary depending on the cost of the qualification.

What’s likely to happen?

Based on what Birmingham has foreshadowed the reformed VET FEE-HELP scheme is likely to include:

• enforcement of requirements for ethical marketing and enrolments;

• tougher entry standards and potentially a full re-accreditation process for providers;

• closer monitoring or quality and enrolment levels;

• maximum loan levels set for different qualifications; and

• a limitation on the number of courses that are funded through VET FEE-HELP.

These reforms to VET FEE-HELP are necessary. However, the scheme operates in two ways:

• for full-fee courses, where providers have set their own fee levels; and

• through the states – which have overall responsibility for VET funding – for state-subsidised courses and where the states regulate student fees.

Unsurprisingly, almost all of the growth in VET FEE-HELP has been for full-fee courses where the federal government has not been able to properly regulate and oversee the market. States were also able to shift costs to the Commonwealth by moving courses from state-funded to full-fee courses.

The states also set requirements for VET providers to access funding, set prices, determine funding eligibility for courses and students, monitor quality, and generally oversee VET funding in each jurisdiction – including for courses the Commonwealth will also fund through VET FEE-HELP.

There is a high risk that under these two systems:

• providers will continue to shop between the Commonwealth and the states for the best price and conditions;

• the states will continue to be able to shift costs to the Commonwealth;

• providers will be subject to overlapping but inconsistent contractual and quality assurance requirements; and

• students in VET certificate programs – who face increasingly high upfront fees – will not be able to access an income-contingent loan, unlike students in higher-level VET courses and in higher education.

A new VET financing system is required: one that would encompass both state funding and VET FEE-HELP with clear roles for the Commonwealth and the states.

The system should include agreed pricing, quality assurance requirements, eligibility criteria and oversight in each state and an agreed commitment to the future resourcing requirements for VET into the future.