House of Representative

Explanatory Memorandum

(Circulated by authority of the Minister for Small and Family Business, Skills and Vocational Education, Senator the Hon Michaelia Cash)

Outline

The purpose of this Bill is to provide a remedy for students who incurred debts under the VET FEE-HELP loan scheme as a result of inappropriate conduct by training providers or agents of those providers.

The VET FEE-HELP loan scheme, contained in Schedule 1A to the Higher Education Support Act 2003 (HESA) operated from 2009 to 2016 assisting students with the cost of their studies through a loan with income contingent repayment arrangements. Following its commencement, when the focus was on supporting pathways into higher education, VET FEE-HELP was expanded in late 2012 and the requirement for a pathway to higher education was abolished. The decision to expand the scheme was weighted heavily towards supporting growth in the VET sector, but did not provide sufficient safeguards for students or regulatory powers for the Government. Instead, it provided incentives and rewards for unethical behaviour and misuse of student entitlements.

Under the VET FEE-HELP loan scheme, a number of unscrupulous training providers and their agents targeted vulnerable people. Those targeted were signed up to courses which they may not have had the academic capability or means to complete and may not have understood they were receiving a loan from the Commonwealth that needed to be repaid. Some students were not aware they had signed up to training and were not aware of debts they had incurred. As a result, the scheme left many students with large debts and in some cases little to no training outcomes.

Since 2015, the Commonwealth has progressively strengthened protection for students who are using the VET FEE-HELP loan scheme. The Commonwealth introduced a range of initial reforms through the Higher Education Support Amendment (VET FEE-HELP Reform) Act 2015. In particular, students could have their VET FEE-HELP debts remitted for unacceptable conduct by VET providers (or their agents) that occurred on or after 1 January 2016. The Commonwealth replaced the VET FEE-HELP loan scheme with the vastly improved VET Student Loans program from 1 January 2017. Some continuing students accessed VET FEE-HELP under grandfathering arrangements during 2017 and 2018.

On 1 July 2017, the Commonwealth also established the VET Student Loans Ombudsman (VSLO). The establishment of the VSLO made more data available concerning the scale and detail of complaints, including making apparent that there are a significant number of individual cases which cannot currently be remedied under existing legislation.

As a result, the Bill amends Schedule 1A to HESA to introduce a broad remedy for students who incurred a VET FEE-HELP debt as a result of inappropriate conduct by VET providers or their agents, including where that conduct occurred prior to 1 January 2016. Specifically, the Bill:

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provides for a new discretionary power for the Secretary to re-credit a person's FEE-HELP balance where the person incurred a VET FEE-HELP debt as a result of inappropriate conduct by a VET provider or its agents at any time before the closure of the VET FEE-HELP scheme. Where a student's FEE-HELP balance is re-credited, the student's corresponding debt to the Commonwealth is remitted;

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provides that, in deciding whether to re-credit a person's FEE-HELP balance, the Secretary must be satisfied that the person did not complete the requirements for the relevant VET unit of study and that it is reasonably likely that the VET provider (or its agent) engaged in inappropriate conduct towards the person in relation to the unit or the course of which the unit formed a part;

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provides that the VET Guidelines, a legislative instrument made by the Minister under Schedule 1A to HESA, may prescribe the matters that the Secretary must have regard to in considering whether it is reasonably likely that the VET provider (or its agents) engaged in inappropriate conduct;

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provides the Commonwealth with the ability to recover from the VET provider an amount that is equivalent to the amount remitted, in limited circumstances.

To maximise the availability of a remedy to as many affected persons as possible and maximise the Commonwealth's ability to recover payments made to training providers after 1 January 2016 when the 2015 reforms came into effect, the new provisions would operate in addition to existing provisions in HESA relating to re-credits for unacceptable conduct by VET providers or their agents.

The Bill also amends the Ombudsman Act 1976 to reflect the VSLO's role under the new arrangements.

Financial Impact Statement

This Bill implements the Government's mechanism to provide a remedy for VET FEE-HELP students who incurred debts under the VET FEE-HELP loan scheme following inappropriate conduct.

Costs to government are difficult to estimate as it is not possible to accurately estimate the total number of students impacted by inappropriate conduct, and the quantum varies in each case. The measure includes the application of criteria to assess a student's eligibility for a re-credit, which will be assessed on a case-by case basis. Further, there may be circumstances where debts are re-credited where there is no recovery from the provider.