Rebecca Warfield, pictured with her two-year-old son Nate, signed up for a salon management course and found herself with a $33,000 debt to the government. Picture: Britta Campion Source: News Corp Australia
March 2015 - The Australian
One day she saw a sign promoting the in-house hairdressing course, and signed up for a diploma of salon management.
Warfield never attended the course, due to “personal problems”, and called the college repeatedly to tell them she wanted to withdraw in 2012.
A year later, she was shocked when her accountant informed her she owed the federal government $33,000 in student debt.
“I have dyslexia,” she tells The Australian. “It was very silly of me, I just signed the papers. They told me the government would pay for it.”
When Warfield asked the college for a refund, she recalls, she was told it was too late — and “tough luck”. Redfern Legal Centre spent three months getting the debt cancelled last year.
Solicitor Will Dwyer recalls that a different college had enrolled a migrant man with schizophrenia to study a diploma of travel and tourism, plus a diploma of business management, by offering him a “free” laptop.
“He was doorknocked and pretty much bullied into signing on the spot for something he didn’t understand,” Dwyer says. “It’s pushy marketing with inducements that is misleading and really targeting unsophisticated people through high-pressure door-to-door sales or spruiking outside Centrelink. They’re targeting vulnerable and marginalised people.”
The Abbott government has announced drastic reforms to the vocational education and training sector, to “break the business model” of fly-by-night trainers who have set up colleges to cash in on the open-ended taxpayer support. From April 1, colleges will be banned from offering any inducement — be it a “free” laptop, iPad, meals or even cash — to enrol in diploma courses.
Colleges will find it harder to recruit students from Centrelink offices, aged-care homes and mental health units. From January 1 next year, they will be able to recruit only diploma students who already have a Year 12 or equivalent qualification.
For the first time, colleges will have to formally assess students’ capacity to finish the course and will have a legal “duty of care” towards their students.
Third-party “brokers” are commonly used to recruit students, and paid a commission for every sign-up. One social worker tells The Australian of a caravan park resident on the Queensland Sunshine Coast earning a $100 “spotter’s fee” to sign up fellow residents to study business management. Brokers also have been trawling retirement villages for students who clearly are no longer in the labour market and will never be able to repay their student debts.
Sign-up incentives are still being advertised online. Estrada College popped up as the top result in a Google search for “government funded training” yesterday. “No upfront costs,” the ad states. “iPad included. Study on-campus or online.”
The International Institute for Professional Development is using the classified website Gumtree to promote its diplomas of business and management. “Get Laptop or Tablet+Travel & food Exp,” it says. “No need to pay upfront fees.” The course offers to reimburse students’ travel costs, and a Windows surface or laptop that “becomes the property of the student after they have passed 2nd census date”.
The “census date” is the cut-off point at which colleges can charge non-refundable fees. They have a fat financial incentive to sign up as many students as possible because, under the existing system, the federal government pays them the entire course fee upfront. The student borrows the course fees from the federal government, signing up to a debt that may last a lifetime.
The Abbott government has announced a new ban on billing students for the entire course upfront. Instead, they will have to split fees into four instalments, giving students the chance to withdraw early without having to pay full fees.
Colleges that sign up inappropriate students will be forced to refund their course fees to the government — and will also be fined, possibly twice as much as the cost of the course. From July 1, colleges will no longer be able to market VET Fee-Help training as “free” or “government funded”.
The Assistant Minister for Education and Training, Simon Birmingham, says his reforms will remove the incentive for “people to be setting up their card tables and signing people up outside Centrelink”. He will introduce “work capacity tests” for prospective students “so we don’t see sign-ups of people in aged-care homes”.
Birmingham likens the deregulated VET system to Labor’s disastrous “pink batts” scheme. The $2.8 billion job-generating scheme — offering “free” taxpayer-funded insulation to two million households — attracted so many incompetent and unscrupulous operators that it had to be axed in 2010 following the deaths of four workmen and more than 100 house fires.
The former Rudd-Gillard government deregulated the VET system in 2012 by extending VET Fee-Help to a wide range of diploma courses. Birmingham blames Labor for failing to introduce adequate safeguards for students and taxpayers.
“There was a manifest failure to think about the way some individuals would seek to profit under the scheme and the potential for abuse,” he says. “The unacceptable activities of some training providers are leaving vulnerable Australians with a lifetime of unwanted debt, taxpayers with liabilities that may never be repaid and are damaging the reputation of the many good public, private and not-for-profit training providers.”
In an interim report this month, the Senate’s Education and Employment References Committee has raised concerns about private colleges profiteering from student loans. It cites University of Sydney research showing that private providers reaped $592 million in VET Fee-Help funding last year, compared with just $177m for state-administered TAFE colleges. “The committee is also concerned by evidence suggesting that 40 per cent of all VET Fee-Help loans will not be repaid due to a lack of job opportunities for VET graduates and low wages,’’ the report says.
The VET Fee-Help scheme lets students borrow the entire cost of their course fees from the federal government. They repay the money in small instalments through the tax system once they start earning $53,345 a year. If the money is not paid back, taxpayers carry the debt.
In 2013, 100,000 students borrowed nearly $700m. Last year, 180,000 students borrowed $1.6bn through VET Fee-Help. Debts are levied regardless of whether students finish their courses. A teenager who signs up to an online course to get a “free laptop” but drops out of the course a few weeks later can end up with a lifetime of debt. Some training institutions have been setting up recruitment stands outside shopping centre cinemas to sign up high school students for online courses. The promise of a “free laptop” has been convincing teenagers to sign on the dotted line.
Birmingham says many students have no idea they will owe the government money when they sign up for a supposedly “free” course. “I was quite surprised looking at the existing (VET Fee-Help) assistance form,” he says. “Nowhere did it make clear the total they would be up for if they completed the course, and that’s a remarkable oversight. I want the form to be big, bold and of high impact so that people understand if they sign up for the course they will incur a debt.”
Like university HECS debts, the VET debt does not have to be repaid if the student earns less than the income threshold. VET students can borrow up to $97,728 through the scheme. Those who are being charged full fees, without any state or federal government subsidies, are slugged a 20 per cent “loan fee” on top of the loan. The outstanding debt grows bigger each year, in line with inflation.
“This is a real debt, a real loan, and it goes against your credit assessments,” says Birmingham. “Even if someone is never likely to pay it back, it still has a real impact on their lives.”
Taxpayers are already bankrolling tuition fees for tens of thousands of “dropout” students. Three-quarters of students who take out government loans for vocational training are failing to finish their courses.
Education Department data reveals only 26 per cent of the 30,595 students who enrolled in VET Fee-Help courses in 2011 had finished their course three years later. Astoundingly, just 7 per cent of online students completed.
Employer groups have complained to the Senate inquiry about the shoddy quality of some courses. Service Skills Australia — a federal government-funded industry skills council for the hospitality, fitness, retail and hairdressing industries — says some courses are of “excessively short duration”.
The Australian Digital and Telecommunications Industry Association wants independent audits of providers. “A new entrant is given a diploma in 12 weeks (and) this must have a negative impact on the quality of the training delivery,” it told the inquiry.
The United Voice union, representing childcare workers, told the inquiry that people were being “rushed through courses, including being ticked off on multiple modules in a matter of hours”.
“The pressure for services to have qualified staff combined with government incentives for private providers have led to a situation where some private providers are rushing people through courses with little or no regard as to the quality of the learning outcomes,” its submission states.
The Australian Education Union’s federal TAFE secretary, Pat Forward, accuses some private colleges of using “quickie courses” to maximise profits. “Private providers are taking weeks to deliver diplomas which take 18 months at TAFE,’’ she says. “They simply cannot be providing the same quality in those timeframes. The problem is the incentives that providers have to milk the system, by signing up students for courses they don’t need. Regulation can only solve part of this problem.”
The Birmingham reforms will ban fast-track diplomas. From January 1 next year, a diploma will generally require 12 to 18 months’ study.
Consumer Action Law Centre chief executive Gerard Brody has hailed the government’s belated crackdown but is disappointed it failed to ban all telephone and door-to-door sales. “Signing up to a course like this isn’t like joining the gym,” he argues. “It should be about vocational and educational needs, not a quick sale on your doorstep or an impulse buy over the phone. It is a life decision and brings with it long-term obligations to pay back the fee support.”
Warfield, who resorted to taxpayer-funded legal action to get her VET debt waived, is annoyed that recruiters still come calling. One spruiker approached her outside Centrelink, and another knocked on her door in a Sydney public housing estate. “He told me the average person earns $100,000 a year and the government has an opportunity for you do a course to bridge that gap,” she recalls. “I just said, ‘No, thank you.’ ”
Natasha Bita, National Education Correspondent.
Read the article on The Australian website.
