Taxpayers repay $2bn student loan debts

Over $2bn in student loan debts under the defunct VET FEE HELP scheme have been recredited to almost 130,000 students.

Minister for Employment, Skills, Small and Family Business Michaelia Cash announce a COVID19 Job Trainer skills program at Parliament House in July. Picture: NCA NewsWire / Andrew Taylor

More than $2bn in student loan debts under the defunct VET FEE HELP scheme have been recredited to almost 130,000 students since 2016, amid warnings that tax­payers will continue propping up Labor’s failed vocational education and training program.

The VFH scheme — described by the Australian National Audit Office as poorly designed — was gouged by “dodgy providers” ­offering students incentives to sign up for courses never delivered.

Department of Education, Skills and Employment figures reveal 128,500 students have had $2.05bn in loans recredited since 2016, under redress arrangements led by the Morrison government.

Employment Minister Mich­aelia Cash said the government expected the numbers of recredited loans would “continue to grow”.

“VET FEE HELP enabled dodgy providers to sign up vulnerable students often by providing free laptops or other incentives and failing to let them know that they would incur a substantial debt and little or no qualification,” Senator Cash said.

NSW and Queensland topped the VFH redress list for most students affected and the highest levels of recredited loans approved.

Senator Cash said tens of thousands of students had been cleared of “wrongful debts accrued from courses that were either worthless or never delivered”.

The Australian Competition & Consumer Commission and Education Department officials took action against five VET FEE HELP providers in the federal court for engaging in misleading, deceptive and unconscionable conduct and alleged breaches of consumer law.

Unique International College was ordered to pay $4.165m in penalties and Cornerstone Investment Aust was ordered to pay $26.5m. A hearing on penalties to be paid by the Australian Institute of Professional Education is pending, while a judgment on a fourth case involving Phoenix Institute of Australia is yet to be handed down.

The ACCC also undertook investigations resulting in court enforceable undertakings from two extra VFH providers, Australian Vocational Learning Centre and Careers Australia Group Limited.

Those providers have subsequently agreed to redress measures, supporting the cancellation of student debts.

When the scheme ceased in 2016, the ANAO described it as “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,” the ANAO report said.

The scheme, established in mid-2008, was set up to allow eligible students to access government income contingent loans, removing upfront cost barriers to tertiary education and training.

VFH loans were incurred by the student and course fees paid directly to education providers, with scheme participants expected to repay loans based on income thresholds. The ANAO report said when the scheme was later ­expanded, there was “significant growth in uptake”.

“At its peak in 2015, the total value of VFH loans was $2.9bn (up from $25.6m in 2009). The value of VFH loans not expected to be repaid is significant.

“As at 30 June 2016, the Australian Government Actuary estimated that $1.2bn in loans issued inappropriately by VFH providers in 2014 and 2015 would not be recovered. The actuary also estimated that a further $1bn in VFH loans would not be repaid, largely relating to loan recipients not expected to meet the income repayment threshold for new debts raised in 2015–16.”

Senator Cash said more than a decade on, Australians were “still paying for Labor’s reputational and financial decimation of the VET sector”.

“Labor has no credibility when it comes to skills policy. The ­Coalition government cleaned up Labor’s mess and made sure that dodgy providers could not prey on vulnerable students,” she said.

“We have also bolstered the Australian Skills Quality Authority, which acts as the cop on the beat for unscrupulous providers.”