Changing VET Student Loan Scheme

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Changing VET Student Loan Scheme

VET Student Loan

Incoming Government legislation is changing the Vocational Education and Training (VET) sector, scrapping the broken Vet Fee-Help scheme and replacing it with the VET Student Loan program. But what does this mean for students and the sector as a whole as these changes sweep through?

Over the past year or so, the VET Fee-Help Scheme has received a lot of bad press that, for the most part, has probably been warranted. In some cases, unsuspecting members of the public have been enrolled in courses they knew nothing about with the unscrupulous education providers pocketing the fees (up to $20,000) and leaving the naïve student with a hefty bill to repay!

So, how did the VET Fee-Help Scheme work?

Well, just like the Higher Ed. HECS, VET Fee-Help was a loan scheme for students at the upper end of vocational education studying Diplomas and Advanced Diplomas. Students paid nothing for their course and often received an incentive to enrol (or, for some of the more vulnerable students merely a ‘sign here’) such as an iPad or laptop. The government paid the tuition fees to the education provider and the student was required to repay the debt through the tax system when their income reached an indexed threshold (currently set at $54,000)[1].

Unlike HECS, where fees were pre-set and enrolments into the scheme capped, the fees paid by government for VET Fee-Help were uncapped not pre-set and there was no limit set on enrolments. I know this sounds a little crazy but, nevertheless the government paid on as many applications as were made and, they also paid out whatever the education provider advertised for that intake (year/course). This saw some education providers receiving $10,000 for an online Diploma in Business Administration while others received $20,000 for exactly the same course. The government required no rationale for these high course fees and detailed examination of the payments made over this period would show broad, unsubstantiated discrepancies in fees paid across all courses on the VET training register.

A remarkable thing happened to course prices when the VET Fee-Help Scheme was announced by the Gillard Government in 2012. Courses that had previously been advertised for $4,000 – $5,000 suddenly skyrocketed to $15,000 – $20,000, way more than any market adjustment could justify and, way more than the course costs could realistically substantiate[2]. It was clear that a number of unscrupulous providers were taking advantage of the scheme and the unsuspecting and cash-strapped public.

I mention cash-strapped here because no otherwise sensible person would deliberately choose to owe ten or twenty thousand dollars for a Diploma program that they could buy through other reputable and often high quality education providers for cash (or part payments) for less than five thousand dollars.

The VET Fee-Help program appealed to the least wealthy people in our society, to school leavers not yet earning a wage, to single parents and those who’d recently lost their jobs. It also appealed to many others who had family and other commitments and who saw VET Fee-Help as a sensible way to save hard-earned money for living expenses now and pay back the loan at a later point in time when their wages grew.

This means that, over the five years from 2012 a large number of VET Students have paid out more than they would have for a higher education degree (over 3 years of full-time study) for a one year Diploma program. Many still won’t realise the enormity of their mistake until they start to forge ahead in their career when then have to start paying this loan back – a significant payroll deduction that will make a serious dent in the pay-packet of mid-tier workers.

Throughout 2015 there were a number of quite shocking media reports on the price gouging and unscrupulous practices of some private education providers. There has also been a comprehensive government review, largely in response to the enormous blowout in government funds set aside for the scheme from $325 million in 2012 to $2.9 billion in 2015[3].

As a result, VET Fee Help will cease on 31 December 2016[4] and be replaced with a new scheme called VET Student Loans.

What does it mean for the future?

In a nutshell, the new scheme (VET Student Loans) has been designed to better protect students from the rorting that has occurred in the sector and stop immoral education providers from blatantly profiteering from the scheme.  It will tighten up the compliance and governance required for participating RTO’s and, provide the government with some surety and control over future VET Student Loan expenditure. To do this, the government has finally made the decision to cap the fees it will pay for specific courses. This won’t stop unscrupulous providers from charging exorbitant fees but, it will curb their income as many prospective students just won’t be able to pay the additional fees they will charge. Alternatively, these same providers may decide to drop their fees in line with the government capping. I wonder how the public, especially those students who just months ago paid double or triple these new ‘lower’ fees will feel when this happens?

While we are still waiting for the final Bill to pass parliament, the College for Adult Learning has reviewed the ‘new’ VET Students Loans scheme to illustrate the following benefits for prospective students.[5]

Pros

Fairer Course Fees, student debt capped

New scheme will be capped at price points set by the government (according to the qualification with loans capped at $5,000, $10,000 & $15,000) e.g. a Diploma of Business Admin. will receive a max. loan of $5000.

Eligible Courses aligned to employment opportunities

The new scheme will only be available for ‘approved courses’ i.e. ‘courses that contribute to addressing skills shortages and align with strong employment outcomes

Students no longer pressured to sign-up by unscrupulous providers & brokers

Improved compliance and governance arrangements will help to increase completion rates and get rid of poor/unscrupulous provider. Brokers can no longer be used by VET Student Loan providers.

More High Quality Providers will be licensed to offer VET Student Loans

Tough barriers to entry for providers will help to raise course quality, completions and industry consultation.

Ongoing Student Engagement to be measured/noted by Government

New mandatory engagement measures will require students to log into a govt. website and confirm their ongoing study and that they are ‘active & legitimate enrolments ’

Cons

Capped loans will force students to pay a substantial, additional upfront enrolment fee i.e. $5,000 or more.

The old scheme allowed students to borrow up to $100,000 for study. The caps mean that many of the RTOs who previously offered no upfront fees through VET Fee Help will now have to charge students an enrolment fee to cover the difference between the 2017 published price and the max. loan available through VET student Loan scheme e.g. for the Dip of Business Admin. this could mean students would be around  $5,000 out of pocket/ upfront (in addition to the $5,000 loan to repay).

Popular course not on the list are not eligible for VET Student Loan

Many previously funded courses are no longer eligible for the loan scheme. Students wishing to undertake non-approved courses will be required to pay full fees.

A VET Student Loan acts as a debt against your name

At the end of the day, students are taking out a loan from the Government to pay for their course. If you try to get a mortgage, refinance, get a personal loan, etc. the total amount of the VET Student Loan will count as a debit against your name and effect students financial standing accordingly.

As our charter is to support mid-career workers to further their career aspirations, the College for Adult Learning made a business decision in 2012 not to be involved in VET Fee-Help. Alongside this decision, we also pledged to keep our prices low and at a price point our students could afford without having to go into future debt to pay it off. Most of our students are well-established, many with full-time jobs.  All our courses are below $5,000 and all come with options for part-payments.

In 2017, we pledge our course fees will remain low and be on par with or below the additional enrolment fee required by VET Student Loan Providers – that’s without the additional VET Student Loan that will need to be repaid by students sometime in the near future.

If you are planning to study to progress your current job or to change your career, it makes good business sense to pay a sensible price for you study now rather than have a debt you have to pay off just when your new promotion or career is taking off.

 

 

 

 


[1] Australian Government Study Assist. http://studyassist.gov.au/sites/studyassist/vet%20student%20loans/pages/vet%20student%20loans viewed 22/11/16

[2]Ref. submission to senate standing committee by The College for Adult Learning at: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/vocationaled/Submissions

[3] http://www.smh.com.au/federal-politics/political-news/vocational-loans-scheme-scrapped-loans-to-be-capped-under-major-turnbull-government-shakeup-20161004-gruh3x.html viewed 22/11/16

[4] ibid

[5] https://www.education.gov.au/vet-student-loans

http://www.senatorbirmingham.com.au/Latest-News/ID/3227/New-VET-Student-Loans-a-win-win-for-students-and-taxpayers viewed 22/11/16

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