Interview on ABC AM with Michael Brissenden
Issues with Labor’s failed VET FEE-HELP; New VET Student Loans program

Michael Brissenden: The Federal Government is finally moving to rein in the VET FEE-HELP student loan scheme that’s been widely rorted and cost the Budget billions of dollars. The scheme was introduced by the Gillard Government in 2012 but has blown out considerably over the past three years. VET FEE-HELP completely deregulated fees allowing providers to charge whatever they want. Over the years unscrupulous providers have signed up tens of thousands of students to over-priced courses and many students have been left with large debts. The new scheme will cap the size of student loans, limit the eligible courses and prohibit the use of brokers and direct soliciting of prospective students. I’m joined now by the Minister for Education and Training Simon Birmingham. Simon Birmingham welcome to the program.

Simon Birmingham: Good morning Michael.

Michael Brissenden: This scheme has been a disaster, well we’ve known that for quite some time and I know you like to blame Labor, but you’ve presided over it now for three years. Why has it taken so long to do this?

Simon Birmingham: Well Michael we’ve taken a range of steps. In fact 20 different reform measures were applied over 2015 and 2016 to try to fix this scheme…

Michael Brissenden: [Interrupting]…It didn’t though, did it?

Simon Birmingham: What’s become apparent is that to actually get the shonks out of the scheme, the best thing to do is to close it down which is what the Turnbull Government will do at the end of this year. Unfortunately the actions we’ve taken to date have been stymied by court action and other steps because of the inadequate drafting of the legislation and the approaches that the Gillard Government put into place when they opened it up, so we’re now proposing to close it down and completely start afresh, hit the reset button with a new program from 1 January next year.

Michael Brissenden: Okay, by your own account the costings were 325 million in 2012, 1.8 billion in 2014, 2.9 billion in 2015. It did take a long time for you to act to rein this in didn’t it?

Simon Birmingham: Well Michael when we see the final 2016 figures I expect we’ll see that there is a drop of some hundreds of millions of dollars as a result of the actions the Coalition has taken to date. So it’s not that our actions have been completely ineffective, but they have not been able to push out the door all of the providers that I want to see us get rid of because they are tying us up in court cases and other measures. So the simplest, best approach for us to do is shut the old VET FEE-Help scheme down, Labor’s old failed scheme, start afresh with the new one and put in place a range of different approaches that build from the ground up a transparent, improved arrangement that ensures it’s only genuine students studying worthwhile subjects at quality providers that we’re supporting.

Michael Brissenden: You say some of these companies are tying you up in court processes and whatever. I note the ACCC has begun some prosecutions, is what they’ve done- some of these colleges have done, is it illegal?

Simon Birmingham: In some instances, yes. There are certainly actions that are being undertaken by the ACCC. There are other compliance actions being undertaken by my department. We have seen some providers make millions of dollars of voluntary repayments as well. So there’s a range of different steps that are underway and in those instances we are seeing some student debts waived as a result of those compliance actions.

Michael Brissenden: So you’ll be seeking to recoup money from as many of them as you can presumably?

Simon Birmingham: We’re working as hard as we can with the ACCC to support their actions to get as much money back for the taxpayer and indeed to waive those student debts as well.

Michael Brissenden: Because we had, I mean extraordinary things happening in this system didn’t we. We had private contractors signing up people from disadvantaged communities who were never going to be able to- in some cases never going to be able to complete the courses. They were offering them inducements of free laptops and all sorts of other things. I mean this was an attempted privatisation really that went terribly wrong wasn’t it?

Simon Birmingham: Well it was way back in April last year that we acted to ban the offering of inducements, those laptop giveaways and so on to really try to rein things in and that has had some impact, absolutely, but we do have to acknowledge there’s been appalling behaviour, targeting of some of the most vulnerable disadvantaged Australians, terrible stories of providers going into remote Indigenous communities and signing up Aboriginal Australians to courses that they had little capacity to complete, little intent to complete, little knowledge in fact of what they were signing up to. So this is why we’ve worked hard with the regulator. But it is absolutely another example on top of pink batts, on top of the schools halls of where Labor went terribly wrong in setting up programs. I wish that we had shut it down sooner but I believe we have now got the right approach in place and that right approach will give us a better program for the future that guarantees we’re only supporting students in courses with the likelihood of strong employment outcomes.

Michael Brissenden: Okay, what about those students who’ve been left with debts, will they be given a waiver?

Simon Birmingham: We’re not proposing massive waivers because of course many students did sign up knowingly to what they were entering into. But where there are breaches of consumer law we will be working as hard as we can with the ACCC to make sure prosecutions occur and where there’s evidence that people were misled into signing up to a course, then of course they can expect that those cases should hopefully lead to debt waivers.

Michael Brissenden: So under your new model can you guarantee that it’s all going to be above board, that there won’t be any of this rorting going on, that in fact this will do what it was intended to do?

Simon Birmingham: So we are starting right from the base in building this program up. So firstly, new barriers to entry for participants into this market. So we’ll provide an automatic entry pathway for TAFEs and public providers. Others will be subject to rigorous standards to make sure that only those with strong linkages to employers, strong likelihood of employment outcomes for their graduates actually get through the door to offer loans. 

Secondly, restricting the courses that are available. So we’ll only subsidise those courses that actually have strong employment outcomes, are on the skills list of different states and territories, so that we know that we’re only supporting people to study in areas likely to have strong employment outcomes. 

Thirdly, we’ll be applying loan caps across a range of levels, $5000, $10,000 and $15,000 and those levels will be aligned to the cost of delivery of a course. You have to- Labor proposed at the last election a one size fits all approach to loan caps, you have to recognise that some courses like management or business costs less to deliver than engineering or agriculture, so we’re aligning in a sensible way there. New student engagement measures, new compliance measures to make sure that if we do have problems in future we can cap providers instantly, restrict the number of people they have studying in different programs, a much stronger, more robust system than the one the Labor Party had built.

Michael Brissenden: Unlike the HECS system though it will still be fully privatised? I mean presumably the caps on the loans will restrict how much people- how much these colleges can charge for these courses, is that right?

Simon Birmingham: Well the caps on the loans I expect will put significant downward pressure on prices. We see some of these courses have blown out to more than $30,000 in price. We’re proposing a loan cap of $15,000 for the most expensive to deliver courses. So I expect we will see significant downward pressure on prices and that the only private providers operating in this space will be those of good repute who have strong employment outcomes that they are able to demonstrate to the Government.

Michael Brissenden: Okay, Simon Birmingham we’ll leave it there. Thanks very much for joining us.

Simon Birmingham: Thank you Michael.