September 29, 2017

VET FEE-HELP: A Lifetime of Debt

By Pat Forward

In the current debate around vocational education and amidst the growing concern about the activities of the private sector, a proposal to extend VET FEE-HELP to lower level VET qualifications has emerged. Extending HECS-style income contingent loans to all tertiary students is a proposal being championed by HECS architect, Bruce Chapman and Tim Higgins from the ANU through work under way at the Mitchell Institute for Health and Education Policy at Victoria University.

The key reason put forward for the extension of income contingent loans to all levels of vocational qualifications is equity. It is argued that students in lower level VET qualifications are disadvantaged by their inability to access loans, and are increasingly discouraged by the high costs of these qualifications. These are the same reasons that the proponents of VET FEE-HELP for Diplomas and Advanced Diplomas used to support its introduction at this level, and there is a basic, and crucial dishonesty in this argument.

When income-contingent loans were introduced for higher education qualifications in the late 1990s, it was in the context of a robust debate. Proponents of the scheme raised the issues of the on-going affordability of higher education, the relative economic advantage that those who went to university acquired throughout their lives and the importance of those who were going to benefit from their education contributing to its costs. Those who opposed the proposal argued that education was a social good because everyone in society benefited from increased levels of education and that increasing costs to students, even through a deferred repayment scheme, would discourage many disadvantaged students.

In the end, the proponents won, largely because the income contingent loan scheme was viewed by many as the best of a poor set of options. The argument that students would not be required to start repaying their HECS loan until their incomes reached a reasonable level (hence income-contingent) – that is until the advantages of their education were being experienced in the form of a decent income was convincing for many. If no such advantages were ever experienced, that is, if students never reached that income level, then they would never have to repay the loan. In fact, the argument was that a HECS would encourage participation from disadvantaged groups, and contribute to equity in society.

Debate continues about the effects of HECS in higher education, and the increased levels of participation by low SES students never occurred. Costs increased for students, but the architecture of the scheme has remained in place, notwithstanding Pyne’s recent unsuccessful attempts to de-regulate university fees, and substantially change (and lower) the income levels at which repayment of the loans should commence.

VET FEE-HELP was introduced into the VET sector in 2007 with very little discussion, and with bipartisan support. The crucial early difference between VET FEE-HELP and its university cousin was this lack of public scrutiny. And while there are other crucial differences, I want to argue that the introduction of VET FEE-HELP was a fundamentally dishonest act of governments, who took advantage of the lack of public interest and scrutiny of the vocational education sector, because of the sector’s largely working class base. In other words, governments were forced to engage with the middle class when they sought to shift the costs of higher education onto students, but they felt no such compulsion when it came to vocational education.

VET FEE-HELP, and income contingent loans in vocational education are about shifting the costs of vocational education onto students. And they are not about shifting some of the costs, as they were in higher education – they are about shifting all of the costs. Income contingent loans in vocational education are not about relieving students of the pressure of the costs – they are about making students pay for what was previously offered through TAFE at little or no cost to individuals. They are about a fundamental shift in the way the sector is organised and funded, and while proponents of income contingent loans argue that a solution to governments’ unwillingness to adequately fund vocational education must be found, and that ICLs are probably the best way to increase funding, there remains a fundamental dishonesty in the way the scheme has been introduced. This is because the argument should have been more honestly put: We want to make students pay for all the costs of their vocational education, we think this is the best way to do it – and we think there should be a public debate about whether this is how the sector should be funded.

Instead, now, the debate is being conducted as if VET FEE-HELP or income contingent loans are the saviour of students in VET – a brilliant act of beneficence aimed at rescuing working class students in the same way as their middle class cousins were saved decades earlier.

Nothing could be further from the truth.

VET FEE-HELP and the proposals to introduce it for lower-level VET qualifications are examples of the poverty of public policy formation in the sector, and both political parties should be called to account for their role in its introduction.

VET FEE-HELP is powering the shift to privatisation of vocational education, and its enduring legacy will be the cashed-up private for profit providers who continue to claim more than 75% of VET FEE-HELP loans.

VET FEE-HELP is a blight on the VET sector because:

  • Fees in the VET sector are unregulated (unlike higher education), and the only limit on what private VET providers can charge students for VET qualifications is the $95,000 lifetime limit on the amount a student can borrow;
  • Private VET providers are “for-profit”, unlike private providers in the schools sector, and so government funds, through the loan scheme are being churned directly into profits for owners and shareholder – and these profits are substantially – around 30% in some cases;
  • Providers use the availability and the legitimacy of government loans – VET FEE-HELP – as a way of enticing students into expensive, poor quality courses;
  • The private VET sector is poorly regulated, and it is growing rapidly, almost exclusively on the back of direct government subsidy, and the VET FEE-HELP scheme;
  • Quality of private VET qualifications is uncertain – courses have no minimum duration of learning, which means that providers can deliver them in a fraction of the time required.

Extending VET FEE-HELP or income contingent loans to lower level VET qualifications, and associated proposals to lower the repayment threshold to fix the problem of “doubtful debt” will accelerate the growth of the increasingly powerful, and dubious private VET sector, it will consign a whole generation of disadvantaged students to a lifetime of debt – and it will fundamentally shift the way in which education, across all sectors, is organised in Australia.

We should be concerned about what is happening in public vocational education because the powerful way in which TAFE can act as an agent for equity and social change, as well as the crucial role it plays in the economy is being undermined. We should also be very concerned as the push down of User Pays through income contingent loans into lower level VET certificates opens a whole new market at the upper secondary level – raising the very real prospect of HECS in secondary schools.