$1bn debt waiver for ripped-off VET students

The federal government will waive an estimated $1 billion of debt owed by students ripped off by dodgy colleges in loan rorts.

Minister for Women, Jobs and Industrial Relations Kelly O'Dwyer. Picture: Kym Smith

The federal government will waive an estimated $1 billion of debt, owed by students ripped off by dodgy colleges in loan rorts, in a bid to settle one of Australia’s major public administration scandals.

Legislation introduced to parliament yesterday will give broad powers to bureaucrats to wipe out the debts of students who were the victims of unscrupulous behaviour by colleges using the notorious VET FEE-HELP loan scheme.

The scheme was shut down to new applicants at the end of 2016 after being misused by colleges that enrolled tens of thousands of students in courses they were unlikely to complete and, even if they were completed, were unlikely to help them find jobs.

But while the colleges kept the fees for the course paid through the government’s VET FEE-HELP scheme, the students were then obliged to repay the fees through the tax system.

From 2009 to 2016 the government paid colleges $7.5 billion through the loan scheme, and payments peaked at $2.9bn in 2015, at the height of the rorts.

However, nobody knows what portion of the payments to colleges were dodgy. A government spokeswoman said that, because of the ­nature and scale of the rorting, it was difficult to quantify how much was likely to be reimbursed and the $1bn figure was an estimate.

The legislation, titled the Higher Education Support Amendment (VET FEE-HELP Student Protection) Bill, will give the secretary of the Department of Education and Training broad powers to waive student debts “incurred as a result of the inappropriate conduct of a VET (vocational education and training) provider or its agents”, according to the bill’s explanatory memorandum.

The precise criteria that students will need to meet to be eligible for a debt waiver, and details of the application process, are still to be decided by the government. But it will open the way to much wider loan waivers than an earlier scheme that only applied to students who signed up for VET FEE-HELP loans after 1 January 2016. Settling all complaints from students will take at least until the end of 2020, the government estimates.

The bill was introduced by Jobs, Industrial Relations and Women’s Minister Kelly O’Dwyer, who told parliament some colleges had “employed deplorable tactics, including aggressive marketing schemes, using brokers and cold-calling people”.

“They offered inducements such as laptops and iPads in exchange for a person’s agreement to enrol in a course,” she said. “They provided inaccurate advice regarding courses and the consequences of enrolment. In many instances, these students were not advised that VET FEE-HELP was a government loan that had to be repaid.”

Ms O’Dwyer said it was “essential” to ensure there was no financial burden on people “unfairly caught up in the disreputable conduct” that undermined the scheme.

The bill empowers the government to recover money from dodgy colleges but the amount is not expected to be large.

Most of the rorts were perpetrated by about 20 colleges, but so far only four have been pursued through the courts by the Australian Competition and Consumer Commission.

This week one of the four, Unique International College, successfully appealed against a Federal Court finding last year that it engaged in systemic unconscionable conduct.