The new VET Student Loans vocational education scheme

Article

The new VET Student Loans vocational education scheme

What you need to know

Background

This is a follow up to the article released on 22 September 2016 titled ‘Vocational education providers and VET FEE-HELP, unintended consequences and bad apples’ in which the vocational education and VET FEE-HELP scheme was analysed (with significant issues highlighted) and bringing to the attention of readers that change was forthcoming.

As of 1 January 2017, an industry overhaul has been implemented to address the concerns that had been raised previously. The key change is that the VET FEE-HELP scheme has been replaced by the new ‘VET Student Loans’ (“VSL”) scheme.

VET Student Loans: What you need to know

  • Reduction in eligible courses: One of the major changes is that the Government has restricted the type and number of courses that are eligible for student loans. 478 VET courses previously covered under the old VET FEE-HELP scheme will no longer be covered by the new VSL scheme. This will force students currently undertaking these courses to cover the remaining cost of the course after 31 December 2017 or seek alternative finance. When explaining the decision, Education and Training Minister Simon Birmingham said courses were assessed based on whether the skills were in demand, “We want to ensure that the courses that Australian taxpayers are subsidising and that we are encouraging students to study, will optimise employment outcomes”. Most of the courses being excluded from student loans fell under health, society and culture, or management and commerce subjects
  • Loan caps: Three bands of loan caps at $5,000, $10,000 and $15,000 (indexed) will be set for the vast majority of courses depending on their delivery cost. The Education and Training Minister can review the cap rates at any time in the first 12 months of the scheme and there will be a compulsory review after the first 12 months of VET Student Loans to ensure it is working as intended. Providers will be entitled to set tuition fees above the cap but the government loan will not exceed the cap with any funding gap requiring alternative financing arrangements by students. This differs from the old VET FEE-HELP regime whereby, once a provider gained approval and became registered, it had the freedom to set individual course costs (which it will still be able to do under VSL) but with VET FEE-HELP funding being available to match those course costs with no loan cap barriers in place
  • Student engagement: Students will be required to engage with the VET Student Loans online portal in order to demonstrate legitimate enrolments and exhibit active course progression
  • Increased provider requirements: There is a new provider application process which involves a much higher barrier to entry by assessing an applying provider’s financial performance, governance, relationships with industry and higher education providers, student completion rates, employment outcomes and experience
  • New payment conditions and powers: Enhanced payment conditions, including capping loan amounts and monthly payments in arrears based on actual enrolments and new powers to suspend underperforming providers including freezing payments and remission of student debts
  • Marketing/enrolment restrictions: Prohibiting the use of brokers and marketing agents to enrol potential students and establishing limits on the subcontracting of training

Impact on current VET FEE-HELP students

Current VET FEE-HELP students have the option to continue under the old VET FEE-HELP scheme through to the end of 2017. Existing providers will be entitled to continue to teach these students until the end of 2017. If a student does not inform the Department that they would like to continue under the current scheme, their access to VET FEE-HELP will cease on 31 March 2017.

Impact on current or new VET Providers

  • Provisional approval: Current providers (of the old VET FEE-HELP system) are, subject to meeting certain selection and eligibility criteria, being granted provisional approval as a provider for a six month transition period from 1 January to 1 July 2017. Provisional approval permits the provider to enrol new students in units of study which can be completed by 30 June 2017
  • Formal approval required: All private providers are required to apply for formal approval under the new scheme. Applications are now open with a closing date of 19th February 2017. Approved providers are entitled to enrol new students from 1 July 2017
  • Policies and procedures held to higher standard: Given the requirements under the new VSL scheme, current and potential VET Providers should expect significant scrutiny surrounding their respective company policies and procedures, with a particular focus on service delivery, student engagement and marketing and enrolment practices. In addition, the Commonwealth Department of Education and Training has indicated that VET Provider applicants will need to supply all relevant information at the time of application with incomplete applications not being accepted with the possibility that the applicant will need to resubmit an application the following year.

Conclusion

There is unlikely to be any reprieve from Government, as there was reportedly wide spread abuse of the system, particularly around the quality of students being enrolled.  Those with exposure to the industry should be on notice that there will likely be a number of existing VET FEE-HELP Providers that will fail (some have already) as they are unable to cope with the new restrictions or do not achieve accreditation for the new VSL scheme. Business models that are particularly reliant on the VET FEE-HELP scheme and in particular, those that relied upon outside agents to gain enrolments, will be particularly under pressure.

References:

  1. VET Student Loans Rules 2016’ (21 December 2016) https://www.legislation.gov.au/Details/F2016L02030
  2. Australian Government Department of Education and Training https://www.education.gov.au/vet-student-loans
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