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VET & TAFE sound and ethical business models have reason to be exasperated by the changes. The HELP loan scheme was created to improve access to training and to address a gap in the market for the financing of training.
Since the issues with VET FEE-HELP began to emerge in late 2014, the government has introduced various additional controls. In April 2015, the government banned inducements. In July 2015, the government tightened its regulation of marketing and recruitment practices, clarified students’ understanding of their rights and obligations, and made it easier to withdraw from / waive a VET FEE-HELP debt. It is difficult to say if these measures had the desired effect – the rate of growth slowed, but the scheme continued to grow, to more than 320,000 enrolments in 2015.
From January 2016, many more substantial changes were introduced, such as bans on solicitation, rigorous entry requirements including an independent language, literacy and numeracy( LLN) test, and the demand that providers charge students for debt only as they progress through a course; fees have to be distributed over three census dates, as opposed to being charged in full up front. Stringent new eligibility requirements for providers were also introduced, along with the ability for the government to pause payments, issue infringements and pursue civil penalties for breaches. By pulling on all the available regulatory levers at once, the government has made VET Student Loans one of the most onerous programs for students and providers to access.
The design of the VET Loans Program would thus benefit from a clearer understanding of how the raft of changes introduced in 2015 and 2016 have affected the behaviours and business practices of providers, and the pattern of enrolments since. For example, the three census dates and the requirement for candidates to undertake an independent LLN test should have impeded high-volume sales channels. And if these changes are indeed effective, then the more onerous forms of these controls may not be necessary. On the other hand, if these changes have been circumvented by unethical providers or proven otherwise ineffective, then a substantially different approach would be required.
HOW DO WE DIFFERENTIATE BETWEEN THE REPUTABLE, THE RISKY AND THE UNETHICAL PROVIDERS?
It is clear that government needs to adopt a more sophisticated approach to stratifying the RTO market. There is a tendency to revert to the polarising public-versus-private split, but this differentiation is neither helpful nor accurate. For starters, the statistical work by LH Martin to classify VET providers in Australia has identified at least five groupings. Also, analysis of VET FEE-HELP statistics shows that it is possible to classify providers according to other dimensions, such as pricing, assessment of candidate suitability, delivery mode, and the ability to support learners through to completion.
Adopting a more nuanced classification of VET providers would extend beyond just understanding the statistical differences and similarities. It would start to consider the implications for provider behaviour from governance structures and organisational cultures. This would have implications for policy design and market oversight.
The front-end control on the eligibility of providers( as well as students) of varying risk profiles needs to be balanced against stronger feedback on the back-end delivery of outcomes. Linking financing and loan terms back to long-term outcomes would obviate the need to identify provider risk categories; the system would rely on direct feedback mechanisms, rather than regulation. The holy grail in the international debate on tertiary education finance is to be able to tie access to financing back to actual loan repayment rates – solutions that ensure that providers have socalled skin in the game. These ideas haven’ t received sufficient attention in Australia, and are not reflected in the design of VET Student Loans.
DO WE HAVE THE APPROPRIATE, FUTURE-PROOF GOVERNANCE ARRANGEMENTS IN PLACE?
There are a number of governance issues that need to be considered in order to ensure that VET Student Loans does not merely address past transgressions, but is positioned for future relevance and success.
Government itself needs to find ways to more strongly connect the performance of HELP with its budget bottom line. There are two possible reasons for why the exponential growth in VET FEE- HELP received attention late in the game. First, under the current treatment, the HELP loan book is an income-generating asset, with the cost of the scheme having only a small and delayed impact on the fiscal balance. Second, there is no separate loan book for VET versus other HELP loans for higher education. There is, therefore, no way of recognising or tracking whether repayment rates are likely to be much lower under VET FEE-HELP, relative to HECS-HELP.
As an indication of the small link between the level of loans written and the impact on the bottom line, VET Student Loans legislation is expected to curtail the volume of loans written by about $ 7 billion, but this represents a mere $ 13 million in savings, in budget terms. This may be an appropriate accounting treatment, but it needs to be augmented by more rigorous reporting and monitoring.
Governments at all levels need to consider how VET Student Loans will fit into the broader context of future tertiary funding. Curtailing access to VET loans in 2017 is poorly timed, given the overall decline in government funding for VET in recent years and in light of the looming cliff edge that is the expiry of relevant intergovernmental funding agreements in mid-2017.
Professor Peter Noonan of the Mitchell Institute has recently called for the establishment of an independent authority to oversee and administer funding for tertiary education as a whole. In many ways, the complex funding environment for VET and its growing intersection with higher education needs much more than tighter controls to remedy VET FEE-HELP. It is increasingly apparent that a more future-oriented governance framework is needed to ensure a coherent approach to tertiary-education financing and system design that is able to respond to rapid changes in the sector and to manage the total funding system.
Significant issues under VET FEE-HELP will no doubt continue to attract widespread attention. What we already know about the failures of the scheme provides the basis for a strong policy response. Taking this opportunity to understand and address the deeper systemic issues of the past will ensure that the benefits of income-contingent loans are preserved without risking a repeat of history. ■
Jonathan Chew is the director of management consulting and leadership development firm Nous Group.
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