22 April, 2017

New VET Student Loans don't solve the problems with income contingent loans

By Pat Forward

New VET Student Loans don’t solve the problems with income contingent loans – Pat Forward

In December 2016, the notorious VET FEE-HELP scheme was replaced with a new scheme – VET Student Loans. The Minister for Education and Training, Senator Simon Birmingham, claimed the new scheme would “secure the future and reputation of Australia’s high quality vocational education and training system.” The new loan scheme includes some key differences to VET FEE HELP, including:

  • Limiting loans to courses included on an approved course list
  • Introducing loan caps of $5000, $10,000 and $15,000
  • Requiring existing VET FEE-HELP providers to apply and be approved to offer VET Student Loans
  • Introducing an application fee for bodies to apply to become approved course providers

The government also argues that there are strengthened compliance, governance and payments arrangements

Despite the change of name, and restrictions on the amount of money that students can barrow under the scheme, the VET Students Loan scheme is essentially the same as its now notorious predecessor.

Not all loans are created equally

In examining the VET Student Loans, it is important first to remember the rationale for introducing income contingent loans (ICL) into vocational education in the first place. It was claimed at the time that the introduction of an ICL scheme would open access to vocational qualifications to students prevented from studying due to prohibitive costs in the sector. It was promoted as a HECs-like arrangement.

Neither of these things were true.

At the time of its introduction, students had access to high quality courses in TAFE colleges across the country at a modest cost. The costs for higher level vocational qualifications was growing, but on average the cost was in the hundreds, rather than the thousands of dollars.

VET FEE-HELP was never simply HECs for VET. It was an income contingent loan, but it was fully fee for service. Students were required to borrow the full charge for the course, whereas in Higher Education the government subsidises about 60% of the cost of the qualification– recognising the broader societal benefit of an educated population. This government assistance was not extended to the vocational education sector. In fact, fees in the vocational education sector were entirely unregulated leaving providers able to charge whatever they liked for courses. The only limit was the borrowing limit of the scheme – around $100,000.

VET FEE-HELP was a major public policy shift, but it was introduced with no public discussion and inadequate preparation. In stark contract when HECS was introduced in 1989 it was on the recommendation of a major national public inquiry into higher education financing. There has been no public inquiry into vocational education financing since the Kangan Review in 1974. VET FEE-HELP was introduced, and then radically extended, without public scrutiny or debate.

New and improved VET Student Loans?

The changes in the new loan scheme – VET Student Loans – do nothing to address the stark inequity between the vocational education and higher education sectors – students in higher education will still have 60% of the costs of their degrees met by the government; the amount of money that can be charged through HECS is set by the government; and private for profit providers cannot access HECS.

It is increasingly difficult to see the differences between the sectors as being errors or oversights.

Aside from the sector inequity; a number of the other changes proposed in the new scheme will do little to address the issues of rorting and quality.

Linking courses which are eligible for loans to areas of industry need or skills shortage is a largely discredited process. The “science” behind it is imprecise, and at best, it leaves students and the sector playing catch up, with course offerings lagging behind real-time demand.

As for the much lauded loan caps, limits on the amount of money students can borrow will not stop rorting. It will simply restrict how much profit can be made. Similarly setting completion rates will not necessarily ensure higher completions, but it will most likely encourage an even laxer approach to quality.

In short – the new VET Student Loans scheme may look like it is attempting to fix the problems in the scheme, but on closer examination it is just another band aid solution.

How can we fix this mess?

It is important to make the point that the problems with VET FEE-HELP, and now VET Student Loans cannot be considered in isolation from the other problems which exist across the sector. Many of the problems – low quality provision, low student engagement, poor progression, inconsistent assessment, low completion rates, unscrupulous providers and wasted financing are all evident across the whole sector, have not been confined to VET FEE-HELP provision and will not end with VET Student Loans.

These problems all broadly stem from the marketization and privatisation of the sector, and will continue as long as both major parties remain committed to more market design as the solution to poor market design.

A sensible first step would be a full and independent Inquiry into the funding of the vocational education sector to examine the underlying funding problems in the sector, and to set benchmarks around both the cost of provision and nominal hours required for qualifications. Without having these base facts – any loan scheme open to private for profit providers is able to be rorted. Meanwhile, a comprehensive and meaningful consultation with all stakeholders needs to take place to ascertain what the community wants from its vocational education sector, including whether income contingent loans are appropriate in the sector.

It is our belief that real investment in public vocational education coupled with guaranteed funding for TAFE will best serve our society. While VET Student Loans may not be the complete debacle VET FEE-HELP was, it is by no means a silver bullet for the crisis in vocational education.

Pat Forward is the AEU Federal TAFE Secretary