Vocational training loans are open to rorting, HECS creator warns

BRUCE Chapman, the architect of HECS, has backed a proposal to introduce income-contingent loans for vocational education

BRUCE Chapman, the architect of HECS, has backed Julia Gillard's proposal to introduce income-contingent loans for vocational education.

Professor Chapman said the decision was right in principal, but he warned there must be strict caveats on how it was applied to ensure it was not open to rorting by private training providers.

"There must be very strong caveats about price capping and interest rate arrangements," Professor Chapman said.

The introduction of HECS for vocational diploma and advanced diploma courses is part of the Council of Australian Governments agenda to reform funding of the training sector and is likely to be a key topic at the next COAG meeting in March.

New funding arrangements between the federal and state governments are due to be introduced in July next year.

Professor Chapman said private universities could -- and did -- charge very high fees for some courses.

He said a version of HECS for private education providers called Fee-Help was essentially interest-free, and that was having a flow-on effect on the federal budget. "There has been insufficient attention to this and price capping of private courses," he said, describing the loans as being, in effect, subsidies to private providers.

Robin Shreeve, chief executive of Skills Australia, said vocational education had a very different student profile to universities.

"The government should be able to use levers such as pricing mechanisms to influence student choice, so that in skills shortage areas the nature of the loan might be different," he said.

ANU economist Chris Ryan said the introduction of HECS for vocational education would let providers increase fees without affecting demand. It was also an important equity measure because without upfront fees, there were no barriers to entry.

Gavin Moodie, a higher education analyst from RMIT, said the move could result in less government funding: "As institutions put up their fees, governments are likely to withdraw even more funding, as we saw in higher education under John Howard."

But the states have been put on notice not to replicate the Victorian experience, where income-contingent loans have been extended to students in privately and publicly funded courses.

On the ABC's 7.30 on Friday night, Training Minister Chris Evans repeated calls for Victoria to "clean up" its private vocational sector, which has seen a worrying increase in dodgy providers since market-driven reforms were introduced three years ago.

"In Victoria, we've certainly got some problems," he said.