Bills Digest No. 39,
2018–19
PDF version [583KB]
Dr Hazel Ferguson
Social Policy Section
5 November 2018
Contents
Purpose of the Bill
Background—the
VET FEE-HELP scheme
Financial
implications
Committee
consideration
Policy
position of non-government parties/independents
Position of
major interest groups
Statement of
Compatibility with Human Rights
Key issues
and provisions
Concluding
comments
Date introduced: 20
September 2018
House: House of Representatives
Portfolio: Education and Training
Commencement: Schedule 1 commences 1 January
2019. Schedule 2 commences 1 January 2020.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the Federal
Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at
November 2018.
Purpose of
the Bill
The Higher Education Support Amendment (VET FEE-HELP
Student Protection) Bill 2018 (the Bill) is the latest in a series of
legislative responses to unscrupulous conduct by some vocational education and
training (VET) providers, which resulted in inappropriate lending through the
former VET FEE-HELP loan scheme, which was part of the Higher Education Loans
Program (HELP) from 2009 to 2016.[1]
This Bill proposes to amend the Higher Education
Support Act 2003 (HESA) and the Ombudsman Act 1976
to:
- extend
the circumstances in which the responsible Secretary (currently the Secretary
of the Department of Education and Training) may re-credit a person’s FEE-HELP balance
due to inappropriate conduct by a VET provider or provider’s agent
- allow
the VET Student Loans Ombudsman (VSLO) to make recommendations to the Secretary
in relation to the re-crediting of a FEE-HELP balance and
- allow
the Commonwealth to recover the re-credited amount from the provider.
The Bill also proposes consequential amendments to both
Acts, to account for the Higher Education
Support Legislation Amendment (Student Loan Sustainability) Act 2018,
which replaces the FEE-HELP balance with the HELP balance from 1 January 2020.
Background—the VET FEE-HELP scheme
In 2008, the establishment of the VET FEE-HELP loan scheme
extended the opportunity to defer the cost of a tertiary education course and
repay the debt through the Australian Taxation Office (ATO) to eligible VET
students undertaking a higher level qualification.[2]
Originally conceived as a way to support VET as a pathway to higher education, with
restrictions in place to ensure only providers with a credit transfer
arrangement with universities could offer the loans, VET FEE-HELP became
progressively more vulnerable as these restrictions were lifted from 2009.[3]
The issues for students resulting from the ‘debacle’ have been well documented
elsewhere, but in short involved some providers and their agents using
inducements and misinformation to sign students up to take out VET FEE-HELP
loans for courses of questionable benefit.[4]
According to the Department of Education and Training (DET),
between 2009 and 2015:
The numbers of students accessing VET FEE-HELP jumped by
5,000 per cent, from 5,262 to 272,000.
Average course costs more than tripled, from around $4,000 to
$14,000.
The value of loans landing as debts to students, and as Commonwealth
borrowings, blew out from $26 million to $2.9 billion.[5]
Although concerns about VET FEE-HELP began to emerge
almost immediately, in 2010 issues became progressively more widespread in
subsequent years and gained attention at the federal level in 2014.[6]
From 2015 a number of changes were implemented to improve the monitoring and
enforcement capabilities of DET and the national VET regulator, the Australian
Skills Quality Authority (ASQA).[7]
Changes included banning the use of inducements to encourage students to enrol
in a course, limiting allowable marketing and recruitment practices, clarifying
student rights and obligations, and introducing stricter provider eligibility
and charging requirements and a civil penalty regime.[8]
In December 2016 the VET Student Loans
Act 2016 was passed by the Parliament which replaced the VET FEE-HELP scheme
with VET Student Loans and introduced tighter provider eligibility requirements
and lending controls from 1 January 2017, with some students
remaining in the old scheme under grandfathering arrangements. The performance
of VET Student Loans is subject to ongoing monitoring, and early signs are that
it is performing well.[9]
Financial
implications
In June 2016, the
Australian Government Actuary estimated that a total of $1.2 billion of VET FEE‑HELP
debts had been issued inappropriately in 2014 and 2015.[10]
The Explanatory Memorandum to the Bill states that an
accurate estimate of the financial implications of the Bill is not possible,
due to uncertainties about the number of students specifically affected by
inappropriate conduct, the amount of VET FEE-HELP debt incurred by these
students, and the likelihood of recovering any re-credited amounts from VET
providers shown to have engaged in inappropriate conduct.[11]
The Explanatory Memorandum also indicates that while ‘it
is hoped that all student complaints relating to inappropriate conduct by
providers will be resolved by 31 December 2020, it is not possible to
predict whether this will be the case.’[12]
Committee consideration
Senate Standing Committee for the
Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills has
considered the Bill and sought advice from the Minister regarding the
appropriateness of leaving matters such as what may constitute inappropriate
conduct to the VET Guidelines.[13]
The Scrutiny Digest states:
The committee’s view is that significant matters, such [as]
what constitutes inappropriate conduct in the context of a student loan
re-crediting scheme, should be included in primary legislation unless a sound
justification for the use of delegated legislation is provided. The committee
notes in this regard that a legislative instrument, made by the executive, is
not subject to the full range of parliamentary scrutiny inherent in making
changes through an amending bill.[14]
At the time of writing this Digest, the Minister’s
response had not been received by the Committee.[15]
Policy
position of non-government parties/independents
At the time of writing no non-government parties or
independents have commented on the Bill.
Position of
major interest groups
The Bill has attracted little attention from interest
groups so far, likely due to its continuation of the Government’s established
approach of working to address the consequences of the VET FEE‑HELP
program as the scope of issues become clearer over time. TAFE Directors
Australia (TDA), the national peak body for publicly owned TAFE institutions
and university VET divisions, provided information about the Bill in a recent
newsletter.[16]
Although TDA included little analysis of the Bill, it did observe:
Where debts are waived, the training provider will be
required to repay the Commonwealth, although in many instances, the colleges in
question have long since vanished.[17]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in Section 3 of that Act. The
Government considers that the Bill is compatible.[18]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee on Human Rights reports
that the Bill does not raise human rights concerns.[19]
Key issues
and provisions
Remitting a person’s VET FEE-HELP
debt
Current arrangements
Remitting a person’s VET FEE-HELP debt is dealt with in
Part 2 of Schedule 1A of HESA, under Subdivision 7‑B. The current
arrangements are summarised below.[20]
- Under
subclause 46(2), the VET provider (or the Secretary, if the provider is unable
to act) must re‑credit a person’s FEE-HELP balance with the amount of VET
FEE-HELP debt incurred for a unit if the person applies in writing and meets
‘special circumstances’ requirements under clause 48—that is, if they were
unable to complete the requirements of the unit due to circumstances beyond
their control that emerged after they could withdraw from the unit without
incurring the debt
- Under
clause 46A, the Secretary must re-credit the FEE-HELP balance for the debt
incurred for a VET FEE-HELP unit if the person applies in writing within three
years (or was genuinely unable to meet that deadline) and the Secretary is
satisfied that the VET provider was involved in ‘unacceptable conduct’ in
relation to the unit or the course of study of which it formed a part, on or
after 1 January 2016.[21]
Part 6 of the Higher
Education Support (VET) Guideline 2015 (the VET Guideline) details what
constitutes unacceptable conduct and includes:
- publishing
information suggesting that VET FEE-HELP assistance is not a loan
- engaging
in inappropriate marketing, including providing inducements and cold calling
- providing
inducements
- failure
to provide a VET FEE-HELP notice to the student
- failure
to comply with student requests to cancel the student’s enrolment in the
course, or withdraw the request for VET FEE-HELP assistance, or enrolling the
student in another course of study without the student’s permission
- failure
to advise the student about the timelines that apply to making a request for
VET FEE‑HELP assistance
- failure
to charge fees in accordance with Part 7 of the Guideline, which covers census
dates, fee variations, repaying tuition fees, and what can be included in a fee
and
- failure
to publish information about the tuition fees for the unit in a readily
accessible way on the provider’s website by the day before the student enrolled
in the unit
- Under
clause 46B, the VET provider (or the Secretary, if the provider is unable to
act) must re-credit a person’s FEE-HELP balance with the amount of VET FEE-HELP
debt incurred for a unit if the provider reasonably believes the debt for the
unit contributed to the student’s borrowings exceeding the provider’s notional
loan account amount (effectively a VET FEE-HELP cap which sets the maximum
amount available to a provider’s students), and they are advised by the
Secretary of these circumstances
- Under
clause 47, the VET provider (or the Secretary, if the provider is unable to
act) must re-credit a person’s FEE-HELP balance with the amount of VET FEE-HELP
debt incurred for a unit if the person is not eligible for HELP assistance
because they do not have a tax file number
- Under
clause 51, the VET provider (or the Secretary, if the provider is unable to
act) must re-credit a person’s FEE-HELP balance with the amount of VET FEE-HELP
debt incurred for a unit if the provider ceases to provide the course of which
the unit forms a part before the student has completed the requirements of the
unit.
Currently, under clause 56, if a person’s FEE-HELP balance
is re-credited under the arrangements outlined above, the provider is liable to
re-pay the amount to the Commonwealth, unless the student had enrolled in the
unit as a replacement unit under tuition assurance requirements, and the loan
amount is being remitted under special circumstances arrangements.
Proposed inappropriate conduct
provisions
Schedule 1 of the Bill proposes to insert into Schedule 1A
provisions to remit a VET FEE-HELP debt in cases of ‘inappropriate conduct’ by
a provider or provider’s agent. Proposed clause 46AA (at item 3
of Schedule 1 to the Bill) sets out arrangements for re-crediting the FEE-HELP
balance under these circumstances.
Importantly, unlike the unacceptable conduct provisions
under clause 46A, proposed subclause 46AA(1) will allow the Secretary to
use their own discretion to initiate re-crediting, providing they are satisfied
that the person has not completed the relevant unit of study and that it is
‘reasonably likely’ the VET provider engaged in inappropriate conduct towards
the person in relation to the unit or the course of study of which it forms a
part.
Like unacceptable conduct, the matters to be considered to
meet the standard of inappropriate conduct are to be prescribed in the VET
Guideline—they are not set out in the Bill. Proposed subclause 46AA(2) specifies
that the VET Guidelines may prescribe the same matters to be considered for
inappropriate conduct as are considered for unacceptable conduct, leaving open
the way to include all the elements of unacceptable conduct plus (potentially)
other elements as matters for the Secretary to consider as inappropriate.
Proposed subclause 46AA(3) clarifies that a person
may apply to the Secretary for a VET
FEE-HELP debt to be remitted under the inappropriate conduct arrangements, in
the same way as they would currently under the unacceptable conduct
arrangements—that is, in writing, in the approved form, and accompanied by any
information required by the Secretary. Proposed subclause 46AA(3) also
specifies the application must meet any application requirements set out in the
VET Guidelines.
Proposed subclause 46AA(4) requires that before the
Secretary finalises a decision to refuse to
re-credit a person’s FEE-HELP balance, the Secretary must notify the person of
the decision the Secretary is considering making and the reasons for the
refusal.
Proposed subclause 46AA(6) requires that before the
Secretary finalises a decision to re-credit a person’s FEE-HELP balance, if the
provider would be required to repay the amount to the Commonwealth, the
Secretary notify the provider of the decision they are considering making and
the reasons for this.
In each case, these proposed subclauses require that the
person or provider be given 28 days to make a written submission about why the
Secretary should not make the decision they are considering, and advised that
if no submission is received the Secretary may proceed to make the decision. In
making the final decision, the Secretary is required to take into account any
submission received by the person (proposed subclause 46AA(5)) or the
VET provider (proposed subclause 46AA(7)) within the 28 day period.
Proposed subclause 46AA(8) requires that if the
decision is made to re-credit the FEE-HELP balance under the inappropriate
conduct provisions, the Secretary must advise the person and (if the VET
provider will be required to repay the amount to the Commonwealth) the
provider, ‘as soon as practicable’.
Proposed subclauses 46AA(9) and 46AA(10) limit the
use of the inappropriate conduct provisions up to 31 December 2020,
unless a later date is prescribed in the VET Guidelines. This flexible
deadline, coupled with the lack of a three year application deadline (as exists
in the unacceptable conduct provisions under clause 46A), means this Bill
proposes to provide much more scope than currently exists to address the
ongoing issues arising from inappropriately issued VET FEE-HELP debts.
Additionally, the application provisions at item 9 of the Bill specify
the inappropriate conduct provisions under proposed clause 46AA of Schedule
1A will apply in relation to conduct engaged in by a VET provider (or
agent) before or after the commencement of the Schedule. That is, unlike the
unacceptable conduct provisions, which apply from 1 January 2016
only, the arrangements proposed in the Bill will give the Secretary scope to
remit debts incurred during the full period for which VET FEE-HELP operated.
Proposed subclause 56(4) (at item 5 of
Schedule 1 to the Bill) adds inappropriate conduct to the list of reasons a VET
provider can be required to repay VET FEE-HELP funding to the Commonwealth, but
specifies the VET provider is only liable to repay the amount if the
inappropriate conduct involved treating the person as being entitled to VET FEE‑HELP
assistance when they were not. The recovery
of debts under this subclause is likely to be complicated by provider closures,
which increased significantly in the latter years of VET FEE-HELP, from 98
closures in 2015 to 180 in 2016.[22]
The role of the VET Student Loans
Ombudsman
The VET
Student Loans Ombudsman (the VSLO) investigates complaints about VET
Student Loans and VET FEE-HELP from current and former students, and people who
were inappropriately signed up for a loan under either scheme.[23]
Under the Ombudsman Act the VSLO is responsible for, in respect to the
VET Student Loans and VET FEE-HELP schemes:
- investigating,
making recommendations, and reporting on, VET loan assistance and compliance
with legislated requirements
- giving
providers advice and training about best practice complaint handling and
- developing,
promoting, and reviewing a code of practice relating to services and complaints.[24]
Further, the VSLO may conduct an investigation in response
to a complaint, or on their own initiative.[25]
The VSLO does not have powers to re-credit student loans or compel providers to
re-credit loans or take any other action.[26]
When a complaint relates to a matter that could be dealt with more effectively
by another body, the VSLO must refer the complaint that body.[27]
The Bill proposes to add making recommendations to the
Secretary about re-crediting FEE-HELP balances of a person or class of persons
in cases of unacceptable or inappropriate conduct (proposed paragraph
20ZM(1)(ca)) to the VSLO’s responsibilities (item 7 of Schedule 1 to
the Bill). Importantly, this opens the way for the VSLO to prompt the Secretary
to use their discretionary powers under proposed subclause 46AA(1) (discussed
above) to initiate the process of re-crediting VET FEE-HELP debts for groups of
debtors targeted by providers engaged in widespread inappropriate conduct.
According to the most recent quarterly update from the
Commonwealth Ombudsman’s Office, the VSLO ‘will work with DET on which
complaints made to us will be eligible for consideration by the Secretary under
the new legislation and how the process will operate.’[28]
The most recent statistics suggest some issues are widespread enough to warrant
a more straightforward way of resolving issues of inappropriate conduct by a
particular provider than the current individual application-based approach
under the unacceptable conduct arrangements. The VSLO received 6,405 complaints
in the 2017–18 financial year.[29]
Of all closed complaints at 30 June 2018, the most common reason for
a person to seek assistance from the VSLO was a debt the complainant was not
aware of, either because they weren’t aware of having signed up for the course,
or they weren’t aware that enrolling would incur a debt (800 complaints or 19
per cent of total).[30]
Disputes over loan amounts (371 or nine per cent of complaints), and complaints
about unsolicited contact to enrol (363 or eight per cent of complaints) and
inducements to sign up for study (259 or six per cent of complaints) were also
common.[31]
Proposed paragraph 20ZX7(e) (at item 7 of
Schedule 1 to the Bill) adds a requirement that the number of persons whose
FEE-HELP balances the VSLO recommends to the Secretary for re-crediting be
included in the VSLO’s annual and other reports. The application provisions at
item 9 specify this new reporting requirement will apply for an annual
report from the financial year ending after Schedule 1 commences. The proposed
commencement date for Schedule 1 specified at clause 2 is 1 January
2019, making the first annual report to require these figures the 2018–19
annual report.
Concluding
comments
This is a relatively uncontroversial Bill that proposes to
deal with the ongoing consequences of some VET providers’ conduct under the
discontinued VET FEE-HELP loan scheme, by introducing new discretionary powers
for the Secretary to remit VET FEE-HELP debts in cases of inappropriate conduct
by VET providers over the full term of the scheme. The Bill also proposes to
support these new arrangements by extending the responsibilities of the VSLO to
make recommendations to the Secretary in relation to re-crediting a person’s or
class of persons’ FEE-HELP balance in cases of inappropriate or unacceptable
provider conduct.
While is not clear how the definition of inappropriate
conduct will differ from that of unacceptable conduct, since this will be
specified in the VET Guidelines, the Bill allows for overlaps in these
definitions. Also, by expanding the timeframe for consideration and role for
both the Secretary and the VSLO, the inappropriate conduct provisions will have
much broader application even if the definition of inappropriate conduct itself
is not substantially different from unacceptable conduct.
While the Bill also proposes to make VET providers liable
for repaying re-credited amounts to the Commonwealth if the inappropriate
conduct resulted in a person being treated as eligible for VET FEE-HELP
assistance when they were not, no information is provided about how much the
Commonwealth expects to recover through this mechanism. Issues may arise due to
the hundreds of provider closures that occurred in the later years of the scheme;
however this will not have an impact on achieving the primary purpose of the
Bill, which is to ensure that people who incurred VET FEE-HELP debts due to
inappropriate VET provider conduct are able to have these debts remitted.
[1]. C
Ey, The
Higher Education Loan Program (HELP) and related loans: a chronology,
Research paper series, 2017–18, Parliamentary Library, Canberra, 28 March 2018.
[2]. Ibid.
The scheme was established under the Howard Government by the Higher Education
Support Amendment (Extending FEE-HELP for VET Diploma, Advanced Diploma,
Graduate Diploma and Graduate Certificate Courses) Act 2007.
[3]. J
Griffiths, VET
Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET
Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016,
Bills digest, 41, 2016–17, Parliamentary Library, Canberra, 22 November 2016,
p. 11.
[4]. For
example, see M Warburton, The
VET FEE-HELP debacle: helping its victims and lessons for administration,
LH Martin Institute, Melbourne, December 2016; Griffiths, VET
Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET
Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016,
op. cit.
[5]. Department
of Education and Training (DET), Review
of the VET Student Loans course list and loan caps methodology,
Discussion paper, DET, Canberra, 2017, p. 6.
[6]. Griffiths,
VET
Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET
Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016,
op. cit., p. 12; S Bird (Shadow Minister for Vocational Education), Government
must act to protect quality in the training sector, media release, 7
October 2014; S Bird, Additional
action needed on quality in VET sector, media release, 9 October 2014.
[7]. J
Griffiths, Higher
Education Support Amendment (VET FEE-HELP Reform) Bill 2015, Bills
digest, 60, 2015–16, Parliamentary Library, Canberra, 30 November 2015.
[8]. SeeGriffiths,
VET
Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET
Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016,
op. cit.
[9]. K
Andrews (Assistant Minister for Vocational Education and Skills), Completion
rates on the rise under VET Student Loans, media release, 13 February,
2018.
[10]. Australian
National Audit Office (ANAO), Administration
of the VET FEE-HELP scheme: Department of Education and Training, Australian
Skills Quality Authority, Australian Competition and Consumer Commission,
Audit report, 31, 2016–17, ANAO, Canberra, 2016, p. 7.
[11]. Explanatory
Memorandum, Higher Education Support Amendment (VET FEE-HELP Student
Protection) Bill 2018, p. 3.
[12]. Ibid.,
p. 14.
[13]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 12, 2018, The Senate, 17 October 2018, pp. 10–11.
[14]. Ibid.,
p. 10.
[15]. Senate
Standing Committee for the Scrutiny of Bills, Ministerial
responses, The Senate, Canberra.
[16]. TAFE
Directors Australia (TDA), ‘Student’s
[sic] failed by unscrupulous colleges to have loan debts cancelled’, TDA
Newsletter, 24 September 2018.
[17]. Ibid.
[18]. The
Statement of Compatibility with Human Rights can be found at pages 4–7 of the
Explanatory Memorandum to the Bill.
[19]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 11, 17 October 2018, p. 72.
[20]. To
avoid confusion, under HESA remitting the debt refers to
cancelling or forgiving the student loan debt, whereas
re-crediting refers to applying this decision to the FEE-HELP balance
(which accrues up to the FEE-HELP borrowing limit), to ensure the forgiven debt
no longer counts against the amount the student is able to borrow.
[21]. See
subitem 24(7) of Schedule 1 to the Higher Education
Support Amendment (VET FEE-HELP Reform) Act 2015.
[22]. Australian
Skills Quality Authority (ASQA), Submission
to the Review of the National Vocational Education and Training Regulator
Act 2011 by the Department of Education and Training, 2017, p. 102. These
figures include voluntary closures as well as those caused by liquidation or
regulatory action.
[23]. Commonwealth
Ombudsman, ‘VET Student Loans’,
Commonwealth Ombudsman website, 2018. The VET Student Loans Ombudsman was
established by the Education
and Other Legislation Amendment Act (No. 1) 2017. The
VSLO function operates from within the Office of the Commonwealth Ombudsman.
[24]. Ombudsman Act 1976,
section 20ZM.
[25]. Ombudsman Act 1976,
section 20ZO.
[26]. Commonwealth
Ombudsman, How
we can help you with your VET loan debt complaint, fact sheet, n.d.
[27]. Ombudsman Act 1976,
section 20ZQ.
[28]. Commonwealth
Ombudsman, Quarterly
Update, 4, 1 April–30 June 2018, p. 1.
[29]. Ibid.,
p. 2.
[30]. Ibid.,
p. 6.
[31]. Ibid.
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