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VET & TAFE providers. Until it can complete this work, the department is trying to run the new scheme using the machinery of the old scheme.
It doesn’ t work and there has not been full consideration of the implications of the changes required to accommodate this‘ whole new scheme’. As a result, VET providers are going to struggle to get problems fixed, to reduce their financial and legal exposure and to make the scheme fit for purpose.
Here is my attempt at identifying the three most significant and immediate problems that VET providers are likely to need fixed.
The first concerns the legal notice providers have to issue after a student enrols and before the first census day, and which details the student’ s‘ covered’ fees for the entire course – the VET Student Loan Statement of Covered Fees. Once a provider tells a student that a certain amount of their tuition fees for the course are covered, they cannot require the student to pay that amount of fees. The provider contravenes the VET Student Loans Act 2016 if the provider does so, and a civil penalty of over $ 20,000 may be imposed for such a breach.
Unfortunately, providers may have to tell students how much of their tuition fees can be covered by a loan before they have reasonable assurance that those fees will be paid through the loan scheme. The provider may not have received advice that the student has been approved for a loan. Even if the student is approved for a loan, the student may not provide their tax file number by the census day. If they don’ t, they will not receive a loan for any tuition fees for that fee period.
There is no guarantee that the secretary will pay a student’ s covered fees, even if the student is eligible for a VET Student Loan and the loan has been approved. The Act does not include any right to appeal a decision not to pay a student’ s tuition fees.
It just doesn’ t seem reasonable that providers be required to experience financial losses through no fault of their own.
The second problem is the issues that arise from VET Student Loan debts being incurred on the day the secretary pays the loan amount and not on the census day as with previous loan schemes.
VET providers are being required to issue Commonwealth Assistance Notices to advise students of their debts and to report those debt amounts to the department before those debts have occurred. These are pieces of the old machinery which are still in place but not really suited to the new scheme.
The Commonwealth Assistance Notice does not appear able to provide any new information to the student that would not be contained in the VET Student Loan Fee Notice – the invoice for the first fee period which the provider is also required to give to the student. In other student loan schemes, the Commonwealth Assistance Notice is used to confirm for a student the amount of debt they have incurred. But at the time VET providers issue the notice for a VET Student Loan, the secretary would not have paid the student’ s fees and the student would not have incurred the debt.
Of more concern for providers is the reporting of the student’ s debt to the department. VET providers are required to report a student’ s debt before the student’ s tuition fees have been paid by the secretary and the student has incurred a debt for those fees. In fact, a VET provider will not be paid by the secretary until after the debt has been reported. The VET provider’ s chief financial officer( CFO) has to sign a statutory declaration to certify that the reported data‘ is true and correct in every particular’. The CFO cannot know for certain that the secretary will pay the student’ s tuition fees and cannot know that the student will incur a debt.
My gut tells me that it is slightly inappropriate for the department to be requiring a CFO to sign a statutory declaration to certify the truth of something they cannot know.
The third problem is what appears to be a mistake in drafting the rules, which appear to have inadvertently abolished the loan fee. The policy intention is that a student whose course is not subsidised by a state or territory government has to pay a loan fee of 20 per cent. I do not believe the rules achieve this, and section 13 of my paper seeks to explain why for those who are interested.
If I am correct, no VET provider should be advising a student or reporting to the department that the student has incurred a 20 per cent loan fee until the rules are fixed. The minister has until the first VET Student Loan payments are made to fix this problem.~ This is because there is no debt or loan fee until the secretary pays the student’ s tuition fees. The secretary doesn’ t have to pay those fees until the secretary is ready to do so.
Let’ s hope this problem is fixed quickly, otherwise there is likely to be a mess. It will probably be VET providers that are asked to clean it up. By my reckoning, this mistake would cost the government around $ 200 million a year in fiscal balance terms if not fixed.
The framework for the payment of students’ tuition fees under the VET Student Loans scheme needs to be cleaned up. There were plenty of new civil offences created for any VET provider that doesn’ t get its administration right, including penalties of over $ 10,000 for not giving students required information at the required time and in the required way. If it is that important, it might help if the arrangements were coherent, clear, simple and fair for students and providers.
If it was any other industry, both the legislation and the VET Student Loans Rules 2016 would not have been made without a proper‘ exposure draft’ process. This could have helped ensure that significant parts of the legal framework did not contain errors and were workable.
The last time a change of this magnitude was made to student loan schemes was the Nelson higher education reforms. Most of 2014 was spent in open dialogue with student administrators and technical experts from the sector to get the detail right. There was plenty of stuff to fix on that occasion too.
The government has in place a VET Student Loans Implementation Advisory Group. Apparently, it includes representatives from TAFE Directors Australia, the Australian Council for Private Education and Training, consumer advocates and business lobbies. There is very little public information about it.
I have participated in this type of consultation forum: get a select group of individuals in a room, have them sign secrecy declarations and give them papers just before they are about to be publicly released. Participants have little chance for reflection on the material and no chance to get advice on matters beyond their expertise. They are usually good people in the room, struggling to do their best.
A minister should be able to get confidential advice to help them develop and implement good policy. But these processes are not a substitute for genuine open consultation, particularly when you are at the implementation stage of a $ 2 billion national scheme with major ramifications across the VET sector.
Australia has to get sensible, stable funding and regulatory arrangements in place for its VET sector. It is an essential prerequisite if the sector is to have any chance of delivering benefits for students, business and the economy. ■
Mark Warburton is an honorary senior fellow at the University of Melbourne’ s LH Martin Institute.
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