Vocational education a debacle waiting to happen

A scathing new Australian National Audit Office report has revealed that the taxpayer handed more than $5 billion to vocational colleges between 2013 and 2015 under the VET FEE-HELP scheme. About $2.2 billion will never be repaid.

Private vocational education suffered from bad design under the Gillard-Rudd governments in 2012, and a "lack of monitoring and control" under the Abbott-Turnbull governments from 2013, leading to "costs blowing out even though participation forecasts were not achieved", the Auditor-General found.

In the wake of Tuesday's report, the Government and the Opposition have each blamed the other for failings in the system.

Under the VET FEE-HELP scheme, the government paid colleges up front when they signed up vocational students to courses, with students required to pay the money back once they had earnings more than $54,000 per year.

But, as revealed by Fairfax Media in a series of articles in 2015, unscrupulous colleges were seeking out students living on welfare in housing commission houses, and luring them to sign up to expensive courses by offering free laptops.

Other companies were created to funnel large number of students into the system. But only about 7 per cent of students ever completed online diplomas, and the main beneficiaries of the scheme were the college owners and the salesemen.

Payments to Gurkhas Institute of Technology grew fastest, by 104,000 per cent between 2012 and 2013, but the notorious Phoenix Institute jumped from $2.4 million in 2014 to $106 million the following year – a 4185 per cent increase. MGET increased 15,000 per cent, and Merage Group 23,000 per cent in just a year.

Part of the explosion in cost came from rapid increases in the fees charged for individual vocational courses being offered by relatively new colleges. Colleges were allowed to set their own prices with no oversight by the government, and students had individual "budgets" of $100,000.

The Auditor-General found that, in 2009, the average cost of a vocational course was $4060. By 2013 this had grown to $13,911. In 2016, the fees for a diploma in graphic design were $5492 at one provider, and $59,860 at another. Students studying a diploma of aviation would spend $32,330 at one provider, and $96,000 at another.

The problem was a desire by governments and the education department to get maximum growth out of the private vocational system. Chasing numbers, the department approved too many new colleges as registered training providers with "no evidence of adequate consideration of risk". Colleges were then not monitored closely enough for bad behaviour.

The education department had little knowledge of student numbers or how much was being paid to access courses, relying instead on vocational colleges to divulge details to them.

The department also failed to talk to the other regulators, the Australian Skills Quality Authority and the Australian Competition and Consumer Commission until early 2015, when the costs had already got out of hand.

Some of the colleges were fraudulent. As early as 2013, the regulator, ASQA, had identified that almost half Australia's vocational colleges "could be in breach of the national standards required for registration". And in 2014, more than half the loans issued to colleges were going to just 14 "problem providers".

But the Abbott government took no action until April, 2015, when minister Simon Birmingham banned colleges from giving out free laptops to convince vulnerable students signing up to courses. There was little attention on managing and resolving students' complaints until mid-2015.

The education department told the Auditor-General that "it had not realised the extent of the problems ... until late 2014" when it became clear that the costs had blown out by 30 per cent.

"The expanded VFH scheme had been designed to increase participation in vocational education and training, but there was little evidence that trends in key aspects of the scheme had been monitored, analysed or reported," the Auditor-General found.

On October 5 this year, Mr Birmingham stopped the VET FEE-HELP scheme, and announced a new loans policy would be launched on January 1.

Mr Birmingham responded to the Auditor-General's report by blaming "the former Labor government's failures".

"This report clearly spells out the extent of the mess Labor made of VET FEE-HELP, which opened the floodgates to shonky providers who ripped off vulnerable students and taxpayers," Mr Birmingham said.

"As the ANAO points out, once data emerged highlighting the issues with VET FEE-HELP, the Coalition acted to close Labor's loopholes."

Labor spokeswoman Kate Ellis replied that it was the Coalition's fault.

"It's clear the Government knew about serious problems back in 2014, but they chose to sit on their hands," she said. "Instead of focusing on students, the Liberals changed minister five times and completely dropped the ball."