VET Student Payment Arrangements (Miscellaneous Amendments) Bill 2020

Bills Digest No. 29, 2020–21
PDF version [370KB]

Dr Hazel Ferguson
Social Policy Section
27 November 2020

Contents

Purpose of the Bill
Background: student loans for VET
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions: winding up VET FEE-HELP
Other issues and provisions
Concluding comments

Date introduced: 12 November 2020
House: The Senate
Portfolio: Education, Skills and Employment
Commencement: The day after Royal Assent—except Schedule 1, Part 2, which commences on 1 July 2021.

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 2020.

Purpose of the Bill

The primary purpose of the VET Student Payment Arrangements (Miscellaneous Amendments) Bill 2020 (the Bill) is to amend the Higher Education Support Act 2003 (HESA) to provide for the final winding up of the former VET FEE-HELP scheme by:

introducing an end point for student and Australian Government liabilities associated with VET FEE-HELP, by imposing a deadline on provider reporting
allowing provider debts to the Commonwealth associated with VET FEE-HELP to be recovered by offsetting them against FEE-HELP or VET Student Loans (VSL) payments and
providing for revocation of any remaining VET FEE-HELP provider approvals on 1 July 2021.

The Bill also proposes minor amendments to the administrative arrangements for VSL under the VET Student Loans Act 2016 (VSL Act) to:

clarify that VSL is not required to be paid to a provider in certain instances where a student’s debt would be cancelled and the provider would be required to repay the amount and
automatically revoke the approval of a provider to offer VSL if that provider ceases to be registered to provide VET.

Background: student loans for VET

Between 2008 and 2016, VET FEE-HELP operated under Schedule 1A of HESA as part of the Higher Education Loan Program (HELP).[1] Like the longer-running higher education student loan sub‑schemes HECS-HELP and FEE-HELP, it allowed students to defer eligible course costs and repay the debt through the Australian Taxation Office (ATO) once their income reached a minimum repayment threshold.[2]

In 2017, VET FEE-HELP was replaced by VSL under the VSL Act, with existing students maintaining access to VET FEE-HELP until 31 December 2018 under grandfathering provisions. The decision to cease providing VET FEE-HELP was in response to ongoing concerns about widespread misuse of the program.[3] Substantial increases in students (from 5,262 to 272,000), course costs (from $4,000 to $14,000), and borrowings (from $26 million to $2.9 billion) from 2009 to 2015 had increasingly come to be understood as evidence of rorting, rather than student demand due to improved participation in VET.[4] Commonly, this involved providers and their agents using inducements and misinformation to encourage students to enrol in courses financed through VET FEE-HELP—the program became a revenue stream for unscrupulous providers, while some people who signed up for loans reported being told courses were free, or that they would not have to pay the money back.[5] After a number of reforms to address these issues in 2015 and 2016, VSL was introduced with tighter provider eligibility requirements and lending controls, and so far appears less vulnerable to misuse than its predecessor. A 2019 evaluation of VSL found no evidence of the fraud and misconduct that had become associated with VET FEE-HELP.[6]

The fallout from VET FEE-HELP is still ongoing. At 30 June 2020, redress measures introduced under the Higher Education Support Amendment (VET FEE‑HELP Student Protection) Act 2018 to deal with VET FEE-HELP debt incurred through inappropriate conduct of VET providers, had been used by the Secretary of the department (currently the Department of Education, Skills and Employment, DESE) to remove $1.3 billion in VET FEE-HELP debts, with a further $123 million recommended for removal by the VET Student Loans Ombudsman.[7] The amount of cancelled debt has now exceeded the Australian Government Actuary’s June 2016 estimate that a total of $1.2 billion of VET FEE‑HELP debts had been issued inappropriately in 2014 and 2015.[8]

It was hoped that the redress measures would be finalised by the end of 2020.[9] However, in the 2020–21 Budget, $11.9 million over three years from 2020–21 was provided to continue the measures.[10] At 30 June 2020, the VET Student Loans Ombudsman had 2,898 open VET FEE-HELP complaints still requiring assessment.[11]

Committee consideration

Senate Standing Committee for Selection of Bills

At its meeting on 11 November 2020, the Senate Standing Committee for Selection of Bills deferred consideration of the Bill until its next meeting.[12]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not yet considered the Bill.[13]

Policy position of non-government parties/independents

At the time of writing, no non-government parties or independents have expressed a position on the Bill.

Position of major interest groups

At the time of writing, no major interest groups have expressed a position on the Bill.

Financial implications

The Explanatory Memorandum states that ‘[t]he financial impact of the legislative changes is immaterial on the fiscal balance over the forward estimates.’[14]

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.[15]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.[16]

Key issues and provisions: winding up VET FEE-HELP

Deadlines for final VET FEE-HELP payments

Currently, if an eligible student used VET FEE-HELP to defer the cost of their VET tuition fees, clause 55 of Schedule 1A of HESA requires the Commonwealth to pay the VET provider on the student’s behalf. Although VET FEE-HELP loans are no longer made to students, HESA does not apply any time limits to the operation of clause 55, so providers may continue to claim payments for the entire period VET FEE-HELP was operating. Such a claim raises a payment liability for the Commonwealth and a HELP debt for the student.[17]

Item 2 in Part 1 of the Bill amends clause 55 to add reporting deadline provisions for providers, which will have the effect of adding a time limit on Commonwealth and student VET FEE-HELP liabilities. Under proposed subclause 55(5), the reporting deadline will be before 1 July 2021 for a unit with a census date before 1 January 2018, and before 1 January 2022 for any other unit. Proposed subclause 55(4) will discharge a student from any liability to pay or account for a VET tuition fee if the Commonwealth does not pay the tuition costs to the provider as a consequence of the provider missing the reporting deadline, removing the possibility that providers will seek to recover unpaid amounts from former students.

These amendments do not limit a person’s right to raise a complaint about a former VET FEE-HELP provider, or place a time limit on measures to cancel VET FEE-HELP debts.

Offsetting VET FEE-HELP debts against other student loan payments

Currently, there are a number of different provisions in HESA and the VSL Act dealing with Commonwealth student loan payments to VET providers, and payments by providers to the Commonwealth. However, there is no legislative authority for the responsible department (currently DESE) to reconcile payments and debts across different student loan schemes before making a payment or raising a debt with a provider.

Items 3, 4, and 5 in Part 1 of the Bill amend clause 61 and insert proposed clause 61A in Schedule 1A of HESA to insert this authority. The provisions allow the Commonwealth to offset amounts of FEE-HELP or VSL due to a VET provider against:

a debt resulting from an advance of VET FEE-HELP which exceeded the amount ultimately due to the provider[18]
a debt resulting from a provider using an advance of VET FEE-HELP for a purpose other than that for which it was given[19]
any other debt payable by a VET provider under Schedule 1A—this includes debts incurred under clause 56 due to inappropriate conduct by a provider or a provider’s agent resulting in a person’s HELP balance being re-credited in relation to an amount of VET FEE-HELP.[20]

These provisions will not alter the final financial result for providers or the Commonwealth, but will remove administrative duplication where, for example, a VSL payment is made to a provider at the same time as a VET FEE-HELP debt is raised, resulting in the provider receiving Commonwealth money only to use it to repay a Commonwealth debt. While these kinds of offsets are currently allowable under HESA, they apply only within loan sub-schemes—this is no longer appropriate for VET FEE-HELP, where in most cases payments to providers are no longer being made due to the cessation of the program, and where all payments will cease in 2022 as a consequence of the proposed reporting deadline provisions discussed above.[21]

Revocation of remaining VET FEE-HELP provider approvals

Most providers registered to offer VET in Australia are registered by the national regulator, the Australian Skills Quality Authority (ASQA), under the National Vocational Education and Training Regulator Act 2011 (NVETR Act).[22]

In order to offer student loans, a registered training organisation (RTO) must apply to the department (currently DESE) for approval under the VSL Act—for VET FEE-HELP, approval was previously dealt with under Schedule 1A of HESA.[23]

Currently, the process for a VET provider ceasing to be approved under HESA is dealt with in Division 5 of Part 1 of Schedule 1A. Reasons for revocation of approval include the provider ceasing to be registered under the NVETR Act, and for breaching various requirements under the Schedule.[24] Part 2 of the Bill proposes to repeal this Division, and replace it with proposed
clause 29 (inserted by item 14), which includes a general revocation of all approvals still in force on 1 July 2021.[25] Any responsibilities or conditions imposed under HESA will continue to operate. The savings provision at item 17 of Part 2 retains certain requirements applied under Division 5 for any revocation of approval before 1 July 2021.

Other issues and provisions

The Bill also inserts two new provisions into the VSL Act.

Item 6 in Part 1 of the Bill amends section 20 of the VSL Act, which deals with when the Secretary is not required to pay VSL. Currently, this section deals only with instances where the loan itself would not be legitimate, such as the student not meeting eligibility requirements. Proposed paragraphs 20(h), (i) and (j) clarify that VSL is also not required to be paid in instances where the loan would initially be legitimate, but the student’s HELP balance would subsequently be re-credited (to cancel the debt) under special circumstances arrangements, unacceptable provider conduct arrangements, or Tuition Protection arrangements.[26] Such a re-credit would require the provider to repay the amount to the Commonwealth.[27] Item 8 repeals and replaces Division 1 of Part 6 which deals with re-crediting HELP balances. Within new Division 1, proposed section 67 clarifies that a student may apply for a re-credit prior to the amount being used to pay their tuition fees.[28]

Item 7 in Part 1 of the Bill inserts proposed section 35A, which would automatically revoke the approval of a provider to offer VSL under the VSL Act if that provider ceases to be registered under the NVETR Act. Currently, the Secretary may revoke or suspend approval if they are satisfied the provider is not complying with the VSL Act, or on the provider’s request. [29] Although suspension can be immediate if the Secretary is satisfied the circumstances surrounding the provider’s non-compliance require urgent action, generally suspension or revocation is subject to a notice period (14 days for proposed suspension and 28 days for proposed revocation) during which time the provider may make a written submission as to why the suspension or revocation should not go ahead.[30] While proposed subsection 35A(4) requires the Secretary to notify the body in writing of the automatic revocation, no notice period or submissions process will be applied, except in relation to ASQA’s registration decisions under the NVETR Act.

Concluding comments

The Bill proposes a number of relatively straightforward measures designed to facilitate finalisation of VET FEE-HELP liabilities, namely deadlines for final VET FEE-HELP payments, arrangements to allow VET FEE-HELP debts to be offset against VSL and FEE-HELP payments, and revocation of any remaining VET FEE-HELP provider approvals. It does not alter student access to VSL, or redress measures for VET FEE-HELP.

[1]. The scheme was established by the Higher Education Support Amendment (Extending FEE-HELP for VET Diploma, Advanced Diploma, Graduate Diploma and Graduate Certificate Courses) Act 2007, and discontinued by the VET Student Loans (Consequential Amendments and Transitional Provisions) Act 2016.

[2]. Higher Education Support Act 2003 (HESA), Schedule 1A, Part 2.

[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.

[4]. 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; S Bird (Shadow Minister for Vocational Education), Government must act to protect quality in the training sector, media release, 7 October 2014; S Bird (Shadow Minister for Vocational Education), Additional action needed on quality in VET sector, media release, 9 October 2014.

[5]. 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, op. cit.

[6]. KPMG, Evaluation of the VET Student Loans program: final report, report to the Department of Education, Skills and Employment (DESE), KPMG, [Australia], December 2019, pp. 2, 10.

[7]. Commonwealth Ombudsman, Quarterly update 12: 1 April–30 June 2020, pp. 6–7; Further background about the redress measures is available in H Ferguson, Higher Education Support Amendment (VET FEE-HELP Student Protection) Bill 2018, Bills digest, 39, 2018–19, Parliamentary Library, Canberra, 5 November 2018.

[8]. 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, 31, 2016–17, ANAO, Canberra, 2016, p. 7.

[9]. Explanatory Memorandum, Higher Education Support Amendment (VET FEE-HELP Student Protection) Bill 2018, p. 14.

[10]. Australian Government, Budget measures: budget paper no. 2: 2020–21, p. 81. Legislation is not required to continue these arrangements, as, under subclause 46AA(9) of Schedule 1A of HESA, the final date for re-crediting can be extended beyond 31 December 2020 in the VET Guidelines, currently the Higher Education Support (VET) Guideline 2015.

[11]. Commonwealth Ombudsman, Quarterly update 12, op. cit., p. 7.

[12]. Senate Standing Committee for the Selection of Bills, Report, 10, 2020, The Senate, Canberra, 12 November 2020, [p. 4].

[13]. Senate Standing Committee for the Scrutiny of Bills, Index of Bills considered by the Committee, 20 November 2020.

[14]. Explanatory Memorandum, VET Student Payment Arrangements (Miscellaneous Amendments) Bill 2020, p. 2.

[15]. The Statement of Compatibility with Human Rights can be found at pp. 3–4 of the Explanatory Memorandum to the Bill.

[16]. Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 14 2020, 26 November 2020, p. 57.

[17]. HESA, clause 55 of Schedule 1A and section 137-18.

[18]. HESA, Schedule 1A, proposed paragraph 61(2)(aa) inserted by item 3 in Part 1 of the Bill.

[19]. HESA, Schedule 1A, proposed paragraph 61(3)(aa) inserted by item 4 in Part 1 of the Bill.

[20]. HESA, Schedule 1A, proposed clause 61A inserted by item 5 in Part 1 of the Bill.

[21]. For example, under subclause 61(2) of Schedule 1, if the provider incurs a debt to the Commonwealth due to an advance that is greater than the amount of VET FEE-HELP that is owed, the amount owing can be deducted from any other amount of VET FEE-HELP payable under the Schedule.

[22]. All states except Victoria and Western Australia have referred powers for VET regulation to the Commonwealth, so providers based or offering training in the referring states, or to overseas students, must register with ASQA. Providers only offering courses in Victoria or Western Australia, and not intending to enrol overseas students, do not need to register with ASQA. They can register with their relevant state regulator instead (the Victorian Registration and Qualifications Authority and the Western Australian Training Accreditation Council). See Australian Skills Quality Authority (ASQA), ‘How does an RTO in Western Australia or Victoria become registered with ASQA?’, ASQA website.

[23]. This approval is contingent on being a registered provider. See HESA, Schedule 1A, paragraph 6(1)(c); VSL Act, para. 25(2)(d).

[24]. HESA, Schedule 1A, clauses 29B, 33 and 33A.

[25]. HESA, Schedule 1A, proposed clause 29 inserted by item 14 in Part 2 of the Bill.

[26]. Under the VSL Act, special circumstances apply under section 68 when a student faces circumstances beyond their control that make their full impact after the census day, and make it impracticable for the student to complete the requirements of the course. In these circumstances, the provider must re-credit the student’s HELP balance. Unacceptable provider conduct arrangements under section 71 apply in circumstances defined in the VET Student Loans Rules 2016, such as misleading, deceptive or coercive conduct on the part of a provider. If unacceptable provider conduct occurs, the Secretary may re-credit a student’s HELP balance. Tuition Protection arrangements in Part 5A apply when a provider fails to provide a course as scheduled. Under section 66E, the Tuition Protection Director re-credits the student’s HELP balance if the student is not placed in a replacement course.

[27]. Under section 22 of the VSL Act, a course provider must repay a loan amount to the Commonwealth if special circumstances or unacceptable conduct resulted in a person’s HELP balance being re-credited, while section 66H requires the provider to repay the loan amount to the Commonwealth if Tuition Protection arrangements led to the re-credit.

[28]. Explanatory Memorandum, VET Student Payment Arrangements (Miscellaneous Amendments) Bill 2020, p. 10.

[29]. VSL Act, sections 36 and 38.

[30]. VSL Act, sections 36 and 37.

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