House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Education and Training, Senator the Hon Simon Birmingham)

Notes on Clauses

Clause 1 provides for the short title of the Act to be the VET Student Loans (Consequential Amendments and Transitional Provisions) Act 2016.

Clause 2 provides a table setting out the commencement dates of the various sections in, and Schedules to, the Bill.

Clauses 1 to 3 of the Bill will commence on Royal Assent.

Part 1 of Schedule 1 to the Bill will commence at the same time as the VET Student Loans Act 2016 commences (or not at all if that Act does not commence).

Part 2 of Schedule 1 to the Bill will commence on the later of either when the VET Student Loans Act 2016 (the VET Student Loans Act) commences (i.e. 1 January 2017), or when Schedule 2 to the Higher Education Support Legislation Amendment (2016 Measures No. 1) Act 2016 (HES Amendment Act 2016) commences (or not at all if either of these fails to commence). Schedule 2 to the HES Amendment Act 2016 inserts a new section 180-28 into the HESA, which is in turn amended by Part 2 of Schedule 1 to this Bill - consequently, Part 2 of Schedule 1 to this Bill must commence later than Schedule 2 to the HES Amendment Act 2016.

Schedule 2 to the Bill will commence on Royal Assent.

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule, and any other item in a Schedule has effect according to its terms.

List of abbreviations used in this Explanatory Memorandum

Schedule 1-Consequential amendments

Summary

Schedule 1 to the Consequential and Transitional Bill amends the HESA to wind down the existing VET FEE-HELP assistance scheme under Schedule 1A to that Act.

The amendments to Schedule 1A will preclude the Minister from approving any new VET providers under Schedule 1A to the HESA after 4 October 2016.

On 5 October 2016, the Government announced its proposals for reforms to VET student loan arrangements. Under the new VET student loans program, higher standards will be imposed on VET providers, there will be a reduction in the number of courses for which VET student loans are available, and those loans will be capped, as compared to the current VET FEE-HELP assistance scheme.

This means that there is an incentive for unscrupulous RTOs to pressure current and potential students to remain or enrol in courses with higher tuition fees and access the VET FEE-HELP assistance scheme for as long as possible. Given that certain students will be entitled to VET FEE-HELP assistance for units until the end of 2017, the Government does not want new RTOs taking advantage of the student grandfathering arrangements of the VET FEE-HELP assistance scheme.

Consequently, no applications for approval as a VET provider under Schedule 1A to the HESA will be accepted from 5 October 2016, and no existing applications will be processed. Only those VET providers that are already approved as of the date of the Government's announcement will retain access to VET FEE-HELP assistance during 2017.

The amendments to Schedule 1A will also prevent students being entitled to VET FEE-HELP assistance under that Schedule in relation to units of VET courses that have census days on or after 1 January 2017, unless they are "grandfathered" students.

Grandfathered students - students who had commenced VET courses before the end of 2016, have already received VET FEE-HELP assistance for units of those courses, who remain enrolled and active in those courses with their original provider, and who choose to be grandfathered - will be entitled to VET FEE-HELP assistance under Schedule 1A to the HESA for units with census days before 1 January 2018.

The effect of these amendments is to:

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close down access to VET FEE-HELP assistance to new VET providers from 5 October 2016; and

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close down access to VET FEE-HELP assistance to new students for courses from 1 January 2017; but

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enable existing and active students enrolled with existing VET providers to continue to access VET FEE-HELP assistance for units that have a census day before 1 January 2018.

Schedule 1 also amends the HESA to provide for loan debt calculation and repayments arising from the granting of VET student loans under the VET Student Loans Act. The payment of amounts of VET student loans will give rise to HELP debts under Chapter 4 of the HESA, which will be dealt with the same as other HELP debts under the HESA (including how re-crediting of students' FEE-HELP balances affects those debts, and how the debts are repaid voluntarily or through the tax system).

Schedule 1 also makes a number of consequential amendments to the NVETR Act and the Student Identifiers Act to assist in the administration and enforcement of the VET student loans program.

The NVETR Act is amended to make it clear that it is a condition of an NVR RTO's registration under that Act that it comply with the HESA and the VET Student Loans Act. This will clarify the capacity of ASQA to take action under the NVETR Act for breaches of the HESA and the VET Student Loans Act.

The Student Identifiers Act is amended to make it clear that student identifiers can be collected, used and disclosed for the purposes of the VET Student Loans Act.

Detailed explanation

Amendments to the Higher Education Support Act 2003

Winding down of VET FEE-HELP assistance scheme

Item 16 inserts a new subclause (5) at the end of clause 6 of Schedule 1A to the HESA. The new subclause will prevent the Minister from approving a body as a VET provider after 4 October 2016. This will mean that no RTOs can be approved as VET providers after 4 October 2016, and so their students will not be entitled to VET FEE-HELP assistance.

Item 17 inserts a new subclause (1A) at the start of clause 11 of Schedule 1A. The new subclause provides that the Minister is not required to comply with clause 11 after 4 October 2016. This means that the Minister does not need to make decisions on applications for approval of VET providers after 4 October, and means in practice that the Minister does not need to reject applications because of the new subclause 6(5), and is not bound to make decisions on applications received before 5 October in the timeframes required by subclause 11(3).

In short, any applications for approval as a VET provider for which the Minister was still to make a decision on 5 October 2016 have lapsed, and do not need to be processed; and applications for approval as a VET provider made on or after 5 October do not have to be accepted or processed.

Item 20 inserts new subclauses (3), (4) and (5) at the end of clause 43 of Schedule 1A, to end students' entitlement to VET FEE-HELP assistance.

New subclause (3) provides that a student is not entitled to VET FEE-HELP assistance for a unit with a census day on or after:

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1 January 2017; or

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if the student is covered by subclause (4) (i.e. is a "grandfathered" student) - 1 January 2018.

Subclause (4) covers a student in relation to a unit if:

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before 1 January 2017, the student was enrolled in the course of which the unit forms a part; and

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the unit is provided by the same provider with whom the student was enrolled before 1 January 2017 (original provider), or another provider that has "stepped into the shoes" of the original provider under the original provider's tuition assurance arrangements; and

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before 1 January 2017, the student received VET FEE-HELP assistance for another unit in the same course; and

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the student is and remains (until the end of 2017), a genuine student.

In essence, students enrolled in courses before the end of 2016, and who have received VET FEE-HELP assistance for units of those courses before the end of 2016, will continue to be entitled to VET FEE-HELP assistance for later units of those courses that have census dates before 2018, so long as they remain enrolled with the same course provider (or a substitute provider under tuition assurance arrangements) and engaged in their course.

Without limiting the operation of paragraph 43(4)(d), the intention is that the Secretary will contact existing students prior to the end of 2016, and ask them to "opt in" to the grandfathering arrangements in the Bill. Students who haven't opted in by 31 March 2017 will generally not be regarded as genuine students.

Subclause (5) provides that a student is not entitled to VET FEE-HELP assistance for a unit if a VET student loan under the VET Student Loans Act has been approved for the student for the course of which the unit forms a part.

During 2017, a grandfathered student may be eligible for a VET student loan for their course under the VET Student Loans Act, and also entitled to VET FEE-HELP assistance for units of that course. In those cases, the student will be able to decide whether to apply for a VET student loan or VET FEE-HELP assistance. In the event the student applies for both and is approved for the VET student loan, new subclause 43(5) will ensure that the student does not receive two loans covering the same tuition fees for the units.

Items 14, 15, 18 and 19 insert notes to explanatory clauses (clauses 1, 2 and 40) of Schedule 1A, as a consequence of the amendments made by items 16, 17 and 20.

VET student loans to be debts administered under Chapter 4 of the Higher Education Support Act 2003

Items 1, 2 and 3 amend section 104-15 of the HESA so that a person's FEE-HELP balance is reduced by the amount of any VET student loan amount paid to the student; and is increased when re-credited under Part 6 of the VET Student Loans Act. (A person's FEE-HELP balance is the amount of their "FEE-HELP limit" that is left at any particular time. A person's FEE-HELP limit is, in effect, their "lifetime cap" on Commonwealth student loans in the form of FEE-HELP assistance, VET FEE-HELP assistance, and VET student loans. In 2016, the FEE-HELP limit for most students was $99,389).

Item 6 amends section 137-1 of the HESA to provide that a VET student loan debt is a kind of HELP debt (and hence it will be administered under Chapter 4 of the HESA).

A person discharges HELP debts in accordance with Part 4-2 of the HESA.

Item 7 inserts a new section 137-19 into the HESA, which will create VET student loan debts.

A person will incur a VET student loan debt if the Secretary approves a VET student loan for the person (under the VET Student Loans Act), and uses an amount of that loan to pay tuition fees for the person for a course.

The amount of a VET student loan debt is 120% of the amount loan (or such lower percentage of the loan amount as specified in rules made under the VET Student Loans Act). This treatment is consistent with VET FEE-HELP assistance debts (see section 137-18 of the HESA), which also incur a 20% administration fee.

A VET student loan debt is incurred on the day the Secretary pays the loan amount. This is different to VET FEE-HELP assistance debts, which are incurred on the day after the census day of the unit for which the assistance is provided, whether or not any payment of VET FEE-HELP assistance has been made. In short, VET student loan debts are only incurred when the Secretary actually makes a payment of a loan amount under the VET Student Loans Act (or is taken to have made a payment of a loan amount under subsection 22(6) of that Act).

A person's VET student loan debt is remitted to the extent of any amount that their FEE-HELP balance is re-credited under the VET Student Loans Act. Part 6 of the VET Student Loans Act provides for the circumstances in which a person's FEE-HELP balance can be re-credited.

Items 8, 9, 10, 11, 12 and 13 amend provisions in Division 140 of the HESA, which provide for the calculation of a person's accumulated HELP debt. These amendments simply allow a person's VET student loan debts (incurred under new section 137-19) to be factored into those calculations. There are no changes to the substance of the calculation provisions.

Items 4 and 5 amend explanatory sections (sections 129-1 and 134-1) of the HESA as a consequence of the amendments made by the items noted above.

Other amendments of the Higher Education Support Act 2003

Item 21 inserts definitions of VET student loan and VET student loan debt into the Dictionary (Schedule 1) to HESA.

Items 24 and 25 will amend section 180-28 of the HESA, which provides for the use and disclosure of "Higher Education Support Act information" for the purposes outlined in that section. Section 180-28 is being inserted into the HESA by Schedule 2 to the HES Amendment Act 2016.

The purpose of the amendments made by Schedule 2 to the HES Amendment Act 2016 is to support the HELP data improvement project, that will link data held by the Department of Education and Training with data held by the Australian Taxation Office. The project will improve the ability to analyse HELP debts and debtors, better understand factors affecting the loan program, assess the impact of policy changes over time, and assist in future administration of that program.

The amendments of section 180-28 to the HESA made by items 24 and 25 of this Bill will ensure that information collected under the VET Student Loans Act will form part of the Higher Education Support Act information which can be used and disclosed for the HELP data improvement project.

Amendment to the National Vocational Education and Training Regulator Act 2011

Item 22 inserts a new section 24A into Subdivision B of Division 1 of Part 2 of the NVETR Act. The section provides that:

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an NVR RTO that is a VET provider (within the meaning of the HESA) must comply with the HESA; and

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an NVR RTO that is an approved course provider (within the meaning of the VET Student Loans Act) must comply with that Act.

Under paragraph 17(2)(b) of the NVETR Act, an applicant's compliance with new section 24A will be a matter for ASQA to consider in deciding whether or not to register an applicant for registration as an NVR RTO.

Under paragraph 20(b) of the NVETR Act, compliance with new section 24A will be a condition of an NVR RTO's registration under that Act. Consequently, ASQA will be able to take action against an NVR RTO's registration under the NVETR Act for breaches of the HESA or the VET Student Loans Act.

Note that, under section 45 of the VET Student Loans Act, ASQA will be able to undertake compliance audits of approved course providers; and is also empowered under Part 8 of that Act to monitor and investigate approved course providers' compliance with that Act.

Amendment to the Student Identifiers Act 2014

Item 23 inserts a new section 18A into Division 5 of Part 2 of the Student Identifiers Act. Division 5 of Part 2 places controls around the collection, use and disclosure of student identifiers issued by the Student Identifiers Registrar under that Act.

The new section 18A will provide that an individual's student identifier can be collected, used and disclosed by a VET-related body (as defined in that Act) or the Commissioner of Taxation, if the collection, use or disclosure is for the purposes of performing functions or exercising powers in relation to the VET Student Loans Act.

Under section 17 of the VET Student Loans Act, a student applying for a VET student loan must include their student identifier on their application form. Under section 20 of the VET Student Loans Act, the Secretary does not have to pay an amount of a VET student loan if the student has not given the Secretary his or her student identifier. The requirement that students approved for VET student loans will hold a student identifier will enhance the integrity of VET student loans and improve program performance assessment and policy development.

Schedule 2-Transitional provisions

Summary

Schedule 2 to the Consequential and Transitional Bill will provide access to the new VET student loans program to certain RTOs that are currently approved as VET providers under Schedule 1A to the HESA.

Australian universities - Table A providers and Table B providers under the HESA - as well as TAFEs and other publicly-owned RTOs approved under Schedule 1A to the HESA, will be automatically approved for the purposes of the VET student loans program from 1 January 2017, enabling students enrolled in approved courses at those providers to access VET student loans from the start of 2017.

Other RTOs that are currently approved as VET providers under Schedule 1A to the HESA can be approved for the purposes of the VET student loans program for the period from 1 January to 30 June 2017, if the Secretary is satisfied that they meet transitional suitability requirements, and are not excluded because of non-compliance, in accordance with rules made by the Minister.

Current VET providers that don't meet these criteria will not be approved for the purposes of the VET student loans program from 1 January 2017, and will have to seek approval under the VET Student Loans Act as normal - with any such approval not commencing before 1 July 2017.

Detailed explanation

Item 1 sets out definitions for the purposes of Schedule 2 to the Bill. The definition of provider transition period relates to the period for which private providers' transitional approvals under subitem 2(2) will be in force (see subitem 5(2)). The provider transition period is from 1 January to 30 June 2017, but the Minister is able to extend the period by legislative instrument made under item 8 (so long as he or she does so before 1 July 2017 - see subitem 8(2)).

Item 2 is the principal provision enabling transition of existing VET providers to the new VET student loans program.

Subitem 2(1) provides that certain existing VET providers are taken to have been approved by the Secretary under Division 1 of Part 4 of the VET Student Loans Act - that is, to be approved course providers for the purposes of that Act - from 1 January 2017. This means that students enrolled by those providers in courses that are approved under that Act will be eligible for VET student loans for those courses from 1 January 2017.

The existing providers that are automatically approved under subitem 2(1) are:

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Table A providers and Table B providers as defined in the HESA (i.e. Australian public and major private universities - see sections 16-15 and 16-20 of the HESA);

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TAFEs; and

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other publicly-owned RTOs.

Subitems 2(2) to (5) provide the mechanism by which other existing VET providers can be approved for the new VET student loans program on 1 January 2017.

Under these provisions, an existing VET provider will be taken to have been approved by the Secretary under Division 1 of Part 4 of the VET Student Loans Act on 1 January 2017 only if, before 1 January 2017:

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the provider applies to the Secretary (in accordance with the form approved by the Secretary); and

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the Secretary decides that the provider is suitable to be an approved course provider during the provider transition period.

Under subitem 2(4), the Secretary can decide that a provider is suitable if he or she is satisfied the provider:

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meets suitability requirements determined by the Minister by legislative instrument under item 3; and

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is not excluded from because of circumstances determined by the Minister by legislative instrument under item 4.

Naturally, if the Secretary decides that a provider is suitable, the Secretary must give notice of that decision to the provider.

Note that the effect of subitems 2(1) and (2) is that the providers concerned are granted approvals under Division 1 of Part 4 of the VET Student Loans Act. They are therefore approved course providers for the purposes of that Act, must comply with all the requirements and conditions imposed on approved course providers under that Act, and can be dealt with as such under that Act.

Item 5 provides for the period of approvals that are granted to providers under subitems 2(1) and (2). The approvals of providers under subitem 2(1) (i.e. the "listed" providers) last for 7 years. However, the approvals of providers under subitem 2(2) (i.e. the "private" providers) last only until the end of the provider transition period - which is 30 June 2017, unless the Minister extends that period by legislative instrument under item 8.

Further, a private provider's transitional approval under subitem 2(2) will not be extended under section 33 of the VET Student Loans Act (which provides for extension of approvals while applications for re-approval are being considered by the Secretary).

Under item 6, an existing VET provider whose approval as a VET provider under Schedule 1A to the HESA is subject to one or more conditions will have those same conditions imposed on its approval for the VET Student Loans Act.

Naturally, the Secretary can also impose conditions on a provider's approval under section 34 of the VET Student Loans Act.

Item 7 clarifies that an approval granted under item 2 can be suspended or revoked under the VET Student Loans Act. This item is for clarity only - as an approval under subitem 2 is actually an approval under Division 1 of Part 4 of the VET Student Loans Act, the Secretary can take any action against that approval that he or she could take against any other approval granted under Division 1 of Part 4 of that Act.

Furthermore, an approval of a private provider under subitem 2(2) will be automatically revoked if the provider ceases to be a VET provider under the HESA (e.g. its approval under Schedule 1A to the HESA is suspended or revoked - see clause 29 of Schedule 1A to the HESA).

Items 3 and 4 empower the Minister to make legislative instruments that set out, respectively:

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the suitability requirements that a private provider must meet in order to be granted a transitional approval for the VET student loans program; and

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the circumstances that exclude a private provider from being granted a transitional approval for the VET student loans program.

It is intended that the suitability requirements will address the governance, quality, experience and performance of providers. Examples of the matters that the suitability requirements can address are set out in subitem 3(2) - although the suitability requirements are not necessarily limited to these matters (subitem 3(3)).

It is intended that the circumstances that can preclude a provider from being granted a transitional approval will relate to the provider's history of compliance with the HESA and other laws relevant to its operations as an RTO (including, for example, consumer protection and trade practices laws).

It is intended that the Minister will make these legislative instruments shortly after the VET Student Loans Act and this Bill receives the Royal Assent, to enable assessments by the Secretary under subitem 2(4) to commence as soon as practicable.

Item 9 provides that an approval of an approved course provider under Division 1 of Part 4 of the VET Student Loans Act (other than an approval under item 2 of the Consequential and Transitional Bill) must not begin before 1 July 2017.

Item 10 permits the Secretary to delegate his or her powers under Schedule 2 ot the Bill (e.g. to make decisions under subitem 2(4)) to an SES officer in the Department.

Item 11 empowers the Governor-General to make regulations of a transitional nature in relation to the winding down of the VET FEE-HELP assistance scheme under Schedule 1A to the HESA, or the establishment of the VET student loans program under the VET Student Loans Act and this Bill.

Subitem 11(2) allows those regulations to modify the operation of provisions of the VET Student Loans Act (including any Act or instrument mentioned in the definition of this Act in the VET Student Loans Act) or the Consequential and Transitional Act. To the extent that the subitem permits regulations to modify the operation of Acts, it operates as a so-called "Henry VIII clause".

This provision will enable urgent amendments to be made to the operation of the VET FEE-HELP assistance scheme or the VET student loans program where unforeseen circumstances prevent their intended operation or preclude the transition of students and RTOs from one to the other. It is not anticipated that this provision will be utilised, but the legislation and systems which support the programs' administration are complex, and may need to be adapted quickly if problems arise.

Naturally, any regulations that have to be made to address urgent unforeseen problems will be subject to Parliamentary scrutiny in the usual fashion.

As an additional safeguard, regulations that do affect the operation of an Act can only have effect until the end of 2017, which will give enough time for any major issues to be identified and for the Government to prepare amending legislation for consideration by Parliament if necessary.