Non-government Student Loans for Vocational Programs

Australian startup company Study Loans Pty Ltd is offering loans to students for 6 to 48 months. Rates are 12% to 18% depending on the students credit rating and the education provider's track record. This compares to zero interest on a government VET Student Loans.

No interest is charged on government loans, but they are indexed to the CPI and so the amount to be repaid can increase, depending on inflation. Also the range of providers which students can apply for government loans for has been reduced, in response to poor performance by some providers. So there may be scope for a commercial alternative.

Study Loans Pty Ltd provide a loan calculator, so students can get an idea of the cost. However, the default settings are for 24 months repayment. Students on low incomes may have difficulty with repayments. Increasing the repayment to the maximum of 48 months considerably increases the interest to be paid.


Student Loans Pty Ltd is currently offering loans for courses at 38 education partners. Most of the partners are Registered Training Organizations, offering courses also available at other commercial RTOs and government TAFEs. As an example "Academy of Makeup" offers the  a Diploma of Screen and Media-Specialist Makeup Services (CUA51015). Other providers, such as General Assembly and The Plato Project, appear to be offering courses outside the RTO system.

By focusing on a small range of providers and carefully monitoring student progress, Study Loans Pty Ltd may be able to improve on the success rate of the government loans system, proving a better result for both the students and the company. However, there may be some downsides to the Study Loans Pty Ltd approach, in terms of cost and recognition of qualifications.

Government TAFEs generally charge lower fees than commercial VET providers for the same nationally standardized qualification. As an example, Academy of Makeup's Diploma of Screen and Media-Specialist Makeup Services (CUA51015) is $11,900. The same standardized qualification is $4,060 at TAFE NSW: just over one third the commercial provider's fee. Of course, the student may consider the extra cost for a commercial provider worthwhile, if it provides a superior education (or the student can't get into TAFE).

Student Loans Pty Ltd also partners outside the RTO system. Students may prefer a provider who offers something different to the homogenized, standardized VET programs. But the students may find their qualifications not recognized by industry, or by educational institutions.

Audit Report on Australian Vocational Student Loan Scheme

The Australian National Audit Office has issued a 68 page report on the Administration of the VET FEE-HELP Scheme (December 20, 2016). The Auditor found "The VFH scheme was not effectively designed or administered. Poor design and a lack of monitoring and control led to costs blowing out even though participation forecasts were not achieved and insufficient protection was provided to vulnerable students from some unscrupulous private training organisations." (page 8).

A new VET Student Loans scheme, designed to address deficiencies in the old one, starts1 January 2017. Unfortunately it took the government several years to act, resulting in billions of dollars wasted. It will be interesting to see if similar reforms are introduced to the university student loan scheme, which has some of the same deficiencies as the old VET scheme. In particular, education providers are permitted to offer university degree programs for which there are no jobs.

"Conclusion

7. The VFH scheme was not effectively designed or administered. Poor design and a lack of monitoring and control led to costs blowing out even though participation forecasts were not achieved and insufficient protection was provided to vulnerable students from some unscrupulous private training organisations.

8. The design of the expanded VFH scheme in 2012 was weighted heavily towards supporting growth in the VET sector, but an appropriate quality and accountability framework addressing identified risks was not put in place. As the responsible department, Education did not establish processes to ensure that all objectives, risks and consequences were managed in implementing the expanded scheme. In effect, the department’s focus on increasing participation overrode integrity and accountability considerations that would have been expected given the inherent risks. The department inadequately considered the implications of the changed incentives facing providers and students in the expanded scheme and its role in ensuring effective regulation in conjunction with other regulators—principally the Australian Skills Quality Authority and the Australian Competition and Consumer Commission. There was also a lack of data analytics capability in Education and little internal management reporting or analysis of the VFH scheme to identify emerging problems. The department did not develop measures to assess broader objectives of the scheme (beyond growth) including those related to value and quality in the VET sector. In redesigning the VFH scheme, insufficient regard was given to relevant experiences in other jurisdictions, particularly Victoria, and the risks identified in a Regulation Impact Statement.

9. The administration of the VFH scheme did not safeguard its operation, and did not support the achievement of objectives relating to integrity, quality, value and sustainability. Similar to the scheme’s design and implementation failures, there were weaknesses in Education’s administrative processes for: approving VFH providers; developing and undertaking risk, fraud and compliance activities; controlling payments to providers; making information readily available to students about their rights and obligations under the VFH scheme; and managing and resolving student complaints. While improvements were made to many of these processes in 2016, the initiatives were in place for a relatively short period of time prior to the cessation of the VFH scheme from 31 December 2016."

From  Administration of the VET FEE-HELP Scheme , page 8, Australian National Audit Office, December 20, 2016.

Extend Vocational Education Reforms to Australian Universities?

Reforms to the Australian Vocational education and Training  (VET) Student Loans program will come into effect on 1 January 2017. These will:

• "limit eligibility to courses to those that align with industry needs and have a high likelihood of leading to employment opportunities
• cap loans at $5,000, $10,000 and $15,000 to reflect the cost of delivery (with higher caps for courses with high delivery costs such as aviation)
• require students to regularly engage with the VET Student Loans online portal to ensure they are active and their enrolments are legitimate 
• set a much higher bar for providers to enter the program, with a new application process to assess providers’ relationships with industry, student completion rates, employment outcomes, and their track record as education institutions
• strengthen legislative, compliance and payment conditions, including increased powers to suspend poor performing providers from the program, cancel their payments and revoke their approval
• ban brokers, cold-calling, providers using third party lists to contact students, or incentive-based sales tactics
• limit the subcontracting of training to stop providers ‘selling access’ to higher-fee loans arrangements to training organisations that don’t meet the higher bar to qualify."

From "Stronger vocational education system delivered", Simon Birmingham, Minister for Education and Training, 1 December 2016

It will be interesting to see if the government brings in similar reforms for the university sector, which has its own loans scheme on which the failed VET scheme was based. While there is not the same level of misuse of the university scheme apparent, there is currently no requirement for university programs to align with industry need. If students were also required to undertake Higher Education in smaller increments (first a month long VET Cert IV, then a six month university Certificate, followed by university programs each of no more than two years) these measures would reduce cost and boost completion rates.

Proposed Reforms for Australian Higher Education

The Australian Parliamentary Library issued a Bills Digest, discussing the proposed changes to VET Student Loans (James Griffiths, 22 November 2016). The changes are to address a blow-out in costs in the Vocational Education and Training Sector. However, I suggest these measures will only be a stop-gap. Australia needs a policy which integrates VET and university sector.

One problem in the university sector is falling completion rates. A way to address this would be to use VET as a transition from school to higher education and as a way to support those who do not have sufficient, or recent, schooling. Currently Australian university have numerous ad-hoc programs to prepare students for university. These should be replaced with a coordinated national VET program.

Another way to address completion rates is with nested courses. Student loans could be limited to small qualification increments, so that students have to complete a vocationally useful qualification, before incurring more debt. Those with no prior HE qualification could be required to complete a six month certificate, before articulating to further studies. Students would then progress with qualifications which did not exceed two two years to complete full time. A typical path would be certificate, diploma or advanced diploma, bachelors degree, masters, and professional doctorate.

One element of VET which could be carried over to the university sector is planning for vocational outcomes. Currently universities can offer courses where there is not clear vocational outcome. An alternative would be to require universities to present evidence to show there are likely to be jobs for future graduates. Such predictions cannot be perfect, but some planning would be better than none at all. Universities and the VET would still be free to offer non-vocational programs, but these would not be eligible for student loan support.

Currently PHD programs are separately funded, for the purposes of advancing research. However, very few of the PHD graduates go on to a career in research. The current PHD funding could be reduced by 80% and the saving used for more direct research support. Students would instead have the option of a vocationally orientated professional doctorate, supported by a loan.

Australian Government Abandons Market Based Fees for Vocational Education

Senator Simon Birmingham, Minister for Education and Training, has announced changes to the VET FEE-HELP student loan scheme. Loans will only be available for courses for which there is a job demand. Loans will be capped at $5000, $10,000 and $15,000, depending on the course level. Also there will be "rigorous standards" applied to private training providers, but curiously, the same standards will not apply to TAFEs and other government institutions.

It will be interesting to see if the government moves to implement similar controls on the other part of Higher Education: universities. Currently there are few limits on what universities can offer and what they deliver, relative to what is charged, for both private for-profit universities and public ones. Currently the government effectively caps student university fees, but this has little relationship to the cost of providing a course. Also universities are not required to show a demand for graduates in order to offer a program. The government was intending to free up university fees, but was unable to get the changes through Parliament, which is fortunate, in the light of the blowout in VET fees.

A useful next step would be for the Government to introduce measures to encourage students to undertake lower cost, shorter VET courses, before university. Ideally, most students should do a VET qualification and get work experience in their intended field, before enrolling in university. This could be encouraged by providing incentives for universities to provide credit for VET studies. Unfortunately the new VET measures may have the opposite effect: institutions will be encouraged to enroll more university students as they can charge higher fees than for their VET students. The result may be a less well trained workforce, at a higher cost to the Government.

Tick & Flick Vocational Qualification Rort

A media report includes alleges Australian private training providers awarding certificates without carrying out adequate assesment ("Concerns over 'tick and flick' qualification companies 'rorting' RPL government-funded training scheme", ABC News, 16 April 2016). RPL (Recognition of Prior Learning) allows accredited trainers to issue a certificate and charge the student fees (funded by the government VET-FEE-HELP scheme), without the student having done any training. However, there is still supposed to be an assessment of the student's skills, to a level equivalent to that for students who undertake training.

The integrity of Australia's vocational education and training (VET) sector is important to the community. VET involves the expenditure of billions of dollars of public money (with student fees subsidized by government). Also the safety of the public depends on having skilled workers, as the VET sector certifies workers who undertake safety related tasks. If VET assessment is not correctly carried out then the public is at risk.

The VET sector also has potential for an expansion of export of education, alongside university programs. China is planning to spend $15bn on two million redundant workers from state-owned enterprises ("China to shed 1.8m coal and steel jobs", Yuan Yang, 29 February 2016). This includes retraining for workers. Australian RTOs could retrain some of these workers, or train the trainers.

RPL is is a legitimate part of training. The student has to present evidence that they have the required experience and it meets the requirements for the skill being assessed. As an example, I obtained a Certificate IV in Training and Assessment (TAE40110) partly by RPL. The assessor first discussed with me what relevant experience and training I had and then suggested which VET modules would be suitable. I then had to find evidence of each. This required not only documents, but people to attest to what I had done. It was a difficult and time consuming process, not a "tick and flick" exercise. Also I was not able to obtain a whole qualification by RPL, having to also do several training modules and be tested on these.

Student Loans Tightened for Australian Vocational Educaiton

The laws governing the Australian Vocational Education and Training student loan scheme (VET FEE-HELP), have been tightened. Some measures came in mid 2015 and others as of 1 January 2016. This is to counter rorting of the system by Registered Training Organizations (RTOs). It has been estimated that 40% of student loans will not be repaid. This is unfortunate, as the VET system provides a useful alternative, and stepping stone, to university degrees. The new regulations are unlikely to be sufficient and I suggest that student enrollment for courses be centralized via a government website to allow for better enforcement.

Inducements to students banned: Inducements, such as free laptops for students, were banned as of 1 April 2015. Also RTOs and agents are not to market training via a VET FEE-HELP loan as “free” or “government-funded”. However, it is not clear how this is to be enforced, particularly where RTOs use agents to recruit students.

As an example of the difficulties with encouraging students to think carefully before enrolling, when I typed "diploma of computing" into a web search engine, the first link was headed "VET FEE HELP Courses", having the appearance of an official government announcement, but actually being an advertisement for an RTO. The RTO's website offered "study now -pay later" and "no pre-requisites", with a link to "Enroll Now". The enrollment form had no mention of the cost of a course. To obtain a "Free Course Guide" the student is required to provide their telephone number and only after providing it are they told a "course advisor" will call to discuss their study options. It is only after providing contact details can the student see the cost of the course, on the second last page of a PDF downloaded document.

A search for "diploma of education" produced a similar result, with a link headed "Vet Fee Help Diploma", which was an an advertisement emphasizing the government loans "if you're an Australian citizen you don't pay anything until you're earning over $54,126 a year" and intimidate application, with fees not quoted.

The government's My Skills Website provides useful information in a format which makes it easy to compare providers. But it is likely that many students will instead click on a link in a web search, think this is government endorsed and enroll with that provider. The Australian Government should centralize the enrollment process, via their own web site. In this way, students could be presented with information about the costs and alternatives, before they apply. Only then would their details be passed to the RTO they select.


Student debt incurred with course delivery: As of 1 January 2016, VET providers are banned from levying the entire course debt upfront. The tuition fees must be over at least four fee periods. Students can withdraw early from a unit, before the "census date" with no withdrawal fee. This is likely to be the most effective measure and easiest to enforce. Students will be able to withdraw from studies when they realize the course is not suitable. However, this assumes students are actively engaged in their studies. With blended and particularly on-line courses, a student may be in a state of denial, where they do not want to admit they not progressing and so do not want to withdraw from a unit.

Pre‑requisites for courses: From 1 January 2016, VET providers are required to publish on-line an Entry Requirements Procedure. The minimum requirement for diplomas will be Year 12, or equivalent. Providers must assess each applicant and the Australian Skills Quality Authority (ASQA) verify this, hower the details of how this will happen are unclear.

VET has traditionally been a more open form of education that university, with lower requirements and experience being accepted in place of formal qualifications. One problem inherent in the VET FEE-HELP system is that it only applies to a minimum of a Diploma qualification. Students cannot obtain a loan for the shorter courses (such as a Certificate IV), which could be used for them to build confidence and demonstrate their ability. As a result some students may be denied higher education opportunities.

More training information: From July 2015, the MySkills website (www.myskills.gov.au) has been providing students more information about debt obligations, training providers reported by the regulator, outcomes for the most popular courses, average cost of courses. The MySkills website also now shows students feedback on courses and employment. However, it is unlikely this information will be looked at or have the desired effect on students. As an example, a more expensive course may be perceived as being of higher quality.

Victorian VET Funding Review

A Victorian VET Funding Review by Bruce Mackenzie and Neil Coulson, was released September 2015 (incorrectly dated February 2016 on the Victorian Government website). The report had as its first recommendation:

"1) That the Victorian Government work with the Commonwealth Government to consider the applicability of reforms to the fee-for-service and VET FEE-HELP markets."

However, a major failing of the report is that it diplomatically skirts around the way the flaws in the design of the Commonwealth's VET FEE-HELP scheme has distorted the VET market, wasted public money and damaged the reputation of Australian Higher Education.

The report recommends keeping additional funding for regional training:

"12) That the Government maintain a rural and regional loading to reflect the relatively higher costs involved in rural and regional training provision."

But the report fails to consider the value of on-line training to provide access for regional student, as well as those with work or family commitments, which prevent regular campus attendance.

The report proposes that the student contribution increase the higher the level of qualification:

"18) That the Government adopt the principle that the student contribution increase the higher the level of qualification."

It is not clear why the student contribution should increase with level of qualification. In fact there is no clear explanation in the report as to why VET courses should be subsidized for students who can afford to pay. There is a case for subsidizing courses where there is a shortage of skills and for students on low incomes.

The report recommends limiting Recognition of Prior Learning to 40%:

"36) That the Government limit RPL to no more than 40 per cent of the course volume."

This would have caused me problems, when I obtained 80% of a Certificate IV in Training and Assessment by RPL. I already had a Graduate Certificate in Higher Eduction and years of experience teaching at a university and an award from industry for course design. It would have been frustrating to sit in classes on something I could already do.