VET student loan changes will help gain back control of the sector

The government’s decision to reduce the number of current vocational education and training (VET) courses that will be subsidised under the new VET Student Loan scheme is important if we are to take back control of the sector that has been subjected to rorting.

The ever expanding number of VET courses available were created in an “industry-led” market where you could get a qualification for almost anything.

Around 478 of the current 800 VET courses will be excluded for the new student loan - which is due to come into effect from 1 January, 2017.

These subjects include diplomas in: musical theatre, journalism, mind body medicine, clinical hypnotherapy and creative arts in christian ministry, circus arts, facilitation, life coaching, butler service management and dance movement therapy.

Labelled “lifestyle courses” by the government, they had low enrolment rates and were unlikely to directly lead to employment.

Department of Education figures show that there are currently around 144,000 students enrolled in VET course in Australia. Of those, about 7,000 (5%) will be affected by the changes to which courses are eligible for VET Student Loans

The government has left open a two week period for feedback and consultation to see if a case can or will be made that any of these courses would have strong employment outcomes.

Courses and qualifications that will be subsidised were identified as “STEM courses” or ones that will most likely get students jobs because they are identified on skill needs lists..

In a VET context, “STEM courses” can mean anything from sports science to nursing, information technology to horticultural, and agriculture. Ensuring that students who undertake a STEM course or a course connected with the skill needs lists – whether in VET or at university – can get work represents a real policy challenge for all levels of government.

Impact on industry

So what impact will this have on industry? The list of courses eligible for student loans are all diplomas and advanced diplomas.

Courses like hairdressing are at certificate 3 level, so are not considered under this policy. The states retain funding responsibility for these courses.

While courses like the diploma in journalism, or professional writing and editing are on the list, prospective students would likely pursue at a degree-level course in higher education.

Research on participation has shown VET enrolments and participation are in decline and students are instead choosing to go down the higher education route.

Importance of loan cap on courses

The new VET student loans policy places three bands of loans, with caps of $5,000, $10,000 and $15,000 for a variety of diplomas and advanced diplomas.

The capacity to repay student loans for VET studies in the new scheme can only be improved by connecting the three bands of student loans to an eligible course list that has better employment outcomes.

The cap is important to ensure that students are not subjected to excessive pricing by providers, resulting in overblown debt burdens.

Under the former VET FEE-HELP scheme, a diploma in nursing, for example, would leave students in around $20,000 worth of debt. These students would often end up in low-paid jobs in health care, meaning that they would struggle to pay off their loan.

In the eligible courses list, the loan for Diploma of Business has been capped at $5000. This is because courses like this have low overheads.

On the other hand, a Diploma of Nursing, capped at $10,000, requires providers to have special equipment such as hospital beds for students to practice skills such as bed making and patient transfers.

The Diploma of Agriculture, capped at $15,000, involves providers training students in the use of farm implements and the safe use of machinery like tractors, loaders and irrigation equipment – and will therefore be more expensive to teach.

Student loans should ideally provide the financial basis for tuition, not for returns to colleges and providers as profit but rather as a mechanism to assure quality education and training.