Hi to all,
I just want to highlight my concern about the current trend of the VET Fee Help market. For those not aware, VET Fee Help is a funding program that allows students to effectively take out a loan with the Federal Government to help pay their tuition fees. VET Fee Help is not new and has now been operating since 2009. A student can only access VET Fee Help via an approved training provider (so, an RTO approved for VET Fee Help). At the moment the student can borrow as much as $96,000.00 over their lifetime. The important item to understand is that this loan is repaid through the tax system only when the student’s wages have risen above the current threshold which for 2014-15 will be $53,345.00 (they call this income contingent). There are no interest charges on these debts but the total amount owing is indexed with the CPI so effectively the total amount would grow each year by 1-3% depending on how the economy is going. A lesser known fact is that the student is hit with a whopping 20% loan fee when the loan is established. Currently the national HELP debt (HECS / VET Fee Help) is about $22 Billion and this is growing rapidly. The National Commission of Audit has made a few recommendations about the future administration of HELP debt, see that news article.
What is concerning me about the VET Fee Help program is the way it is getting abused by some providers and way over-heated. It reminds me of that 2006-2009 period when the CRICOS market did the same thing and then collapsed. There are some great providers out there, many are our clients. These are RTOs that offer 12 month / full time / face-to-face training and typically provide their students with a pathway into university or employment. Fantastic! On the other hand we have some providers out there with very poor training programs with minimal or no contact hours (distance or online) which are resulting in very low completion rates. Students are attracted by the big marketing and the opportunities these courses offer and are sold on the basis of train now and pay later. There are no specified restrictions on the amount a provider can charge for a VET Fee Help course (other than the lifetime limit of $96,000.00!). These courses typically cost $12,000.00 plus. From the student’s perspective, they see a big marketing campaign for training being delivered by a course approved by the federal government. Some providers are advertising “Free Training” “Enrol now and nothing to pay”. Some providers are incentivising students with an offer of a “Free Laptop”. Of course the laptop is not free and is factored into the overall tuition fee. I also see very little regulation of the relevant legislation (Higher Education Support Act 2003). It’s certainly not ASQAs responsibility and the federal Department of Education has no real enforcement function.
I predict this program is going to come unstuck. Mind you I said that 18 months ago and it seems to be still going strong. I am certainly giving advice to my clients who have come to rely on this revenue stream that they must diversify. Now that the bad end of town is getting onboard this program, I predict its days are numbered. It may not be ceased altogether but it will certainly have greater limitations imposed on it and it should certainly be regulated by someone! As always it is the student who loses out and ends up with a huge tax debt before they have even begun to earn a proper wage. The only way I see to cleaning this sector up before it goes completely off the rails is we must make a complaint if we see practices that are detrimental to students. We must take action against dodgy providers and bring their poor practices to the attention of ASQA or the Department of Education. In doing this you will help keep this program on-track and weed out the dodgy end of town.
Good training!
Joe Newbery
Published: 1st May 2014