Thursday, 13 October 2016
VET Student Loans Bill 2016; Second Reading
That this bill be now read a second time.
Vocational education and training plays a critical role in ensuring Australia has the skilled workforce it needs to drive innovation and economic growth.
Last year, around 4.5 million people participated in the Australian vocational education and training system.
Australia's economic prosperity depends upon the quality of our graduates, the outcomes of the training they receive and whether they are skilled in the way employers need them to be skilled.
That is why supporting high-quality vocational education and training is central to the Turnbull government's economic growth and jobs plan.
Around 45 per cent of the financial assistance the Commonwealth invested in vocational education and training in 2015 supported income contingent loans for students undertaking diplomas and above qualifications, through the VET FEE-HELP scheme.
The government supports income contingent loans. Without them, thousands of students who could not afford to pay up-front fees to do a tertiary qualification would miss out. And Australian businesses and the Australian economy would also miss out on the skills that those graduates would bring.
But it is also true that there are many students who are being enrolled in courses and taking out VET FEE-HELP loans that deliver no benefit, either to them, or to the economy.
The disastrous VET FEE-HELP scheme will go down in history as one of the great policy failures of the Rudd-Gillard years.
Labor introduced VET FEE-HELP and opened up the scheme in 2012 in a way that allowed unscrupulous providers and brokers in to take advantage of vulnerable students, to rip off taxpayers, and to tarnish the reputation of Australia's high-quality training providers and VET system.
Under Labor's scheme, students were signed up for thousands of dollars in loans for courses they did not need or could never complete, or which had no link to employer or skills needs in the economy.
VET FEE-HELP has come with immense human cost, particularly to those Indigenous Australians in remote communities, older Australians in retirement villages and Australians with disability, who are amongst the many vulnerable people who have been targeted by unscrupulous providers or brokers who have been rorting the VET FEE-HELP system.
VET FEE-HELP has tarnished the reputations of high-quality vocational education and training providers. And VET FEE-HELP has come at an enormous cost to the budget.
As a result of Labor's scheme, between 2009 and 2015:
Reforms to date
As the scale of Labor's failings in VET FEE-HELP became apparent, the coalition government has taken strong action.
In 2015, the government banned inducements being offered to students to enrol in courses for which they needed a loan, and tightened recruitment and marketing practices to make it clear to students what they were signing up for.
On 1 January of this year, we brought in a student entry requirement for access to loans to ensure that prospective students are academically suited for their higher level vocational training, required loans to be levied along with the students' progression in the course rather than in one hit up-front and instituted civil penalties for providers that breached requirements.
We increased protections for students under the age of 18 and introduced a two-day gap to separate a student's enrolment decision from their application for a loan.
And we introduced a loan freeze to stop escalating growth while we undertook consultation to design a new student loan arrangement that had students and their training and employment outcomes at its centre.
All of those actions have made an impact.
It is expected that the value of loans in 2016 will be several hundreds of millions of dollars less than the equivalent in 2015.
However, it is clear that to truly fix the VET FEE-HELP scheme we first need to axe it and build a new program that supports high-quality training, for genuine students, aligned with workplace needs.
The VET Student Loans Bill 2016, along with the two supporting bills in the package—the VET Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016 and the VET Student Loans (Charges) Bill 2016—delivers a new program to give students who are interested in a high-level VET qualification the best opportunity to access the training they need to improve their employment outcomes.
The VET Student Loans Bill 2016
Higher bar to entry
The introduction of VET Student Loans from 1 January 2017 gives us a chance to reset expectations for students, providers, employers and taxpayers.
Unscrupulous behaviour will not be tolerated.
Providers will need to meet tougher entry criteria to become, and to remain, an approved course provider.
These include being a 'fit and proper person' and having to satisfy provider suitability requirements around stronger governance, industry engagement and quality training, which will be specified in the rules.
The bill enables the government to charge an application fee to providers.
Tougher compliance measures
Approved providers will be subjected to much tougher compliance measures and ongoing reporting requirements.
The bill triggers all the powers under the Regulatory Powers (Standard Provisions) Act 2014,including monitoring and investigation powers and enforcement provisions such as civil penalties, infringement notices, enforceable undertakings and injunctions.
Importantly, the bill will also provide a new power to immediately suspend a provider in urgent circumstances.
The bill also expands the monitoring provisions by applying them to all of the bill and not just the civil penalty provisions, as is the current position.
Civil penalties will apply to more contraventions and the amounts of the penalties will, in many instances, increase to be more commensurate with the nature of the contravention.
The bill imposes personal liability on executive officers of providers in relation to contravention of civil penalty provisions or the commission of any offences.
The bill also introduces new measures to allow the Commonwealth to cap an individual provider's loan amounts or restrict a provider's scope of delivery to control non-genuine growth in enrolments or unreasonable fee increases.
Banning brokers and limiting third parties providing training
Providers will be banned from using brokers or marketing agents to interact or engage with students in relation to VET Student Loans.
Enrolment processes and student engagement relating to VET Student Loans should be the sole responsibility of approved providers that have met the higher benchmark.
The bill introduces new limitations on the use of third-party training providers.
Approved providers may only subcontract training to other approved VET Student Loan providers or higher education providers registered by the Tertiary Education Quality and Standards Agency.
Individual subcontractors engaged to provide specialist expertise for part of a course will be allowed on a case by case basis.
This will help redress issues that have occurred with the VET FEE-HELP scheme where some approved providers have been delivering minimal or no training themselves but, rather, have been selling access to the scheme to those that were not approved.
The new VET Student Loans program will limit courses eligible for a loan.
The focus will be on courses that have a high national priority, align with industry needs, contribute to addressing skills shortages and lead to employment outcomes.
The minister will have the power to approve a course list by legislative instrument—the courses and loan caps determination.
The list of 347 courses proposed to be eligible for a VET Student Loan from 1 January 2017 is currently open for consultation.
The determination will give the minister the power to change the list and ensure that it remains flexible to meet changing workplace skills needs.
The bill provides the power for the minister to set loan caps, to help protect students from rapidly rising course costs and set a ceiling on the maximum loan amount the government is willing to loan to a student for a specific course.
Three maximum loan caps are proposed for the start of the program: $5,000, $10,000 and $15,000 per course.
These levels are derived from actual VET FEE-HELP tuition fee data and the New South Wales Smart and Skilled program.
The bill provides for the caps to be indexed annually in line with the government's other student loan programs.
Importantly, the government has recognised that there are some courses which cost more to deliver than the proposed caps, such as aviation.
The bill will therefore enable the minister to amend the caps to provide exemptions where needed.
The government has made clear this will be the exception rather than the rule.
From 1 July 2017, a student engagement and progression requirement for continued access to the loan will apply.
Students will be required to progressively log in to confirm their continued engagement in the course. The detail of the student engagement measures will be set out in the rules.
Ensuring students get what they pay for
Greater protections will be provided for students by shifting the ability to access a loan away from the provider to the student.
Student loans will be approved by the Commonwealth but only if the student is eligible and it is for a course that is an approved course.
Flexibility is given to the Commonwealth as to when loan payments may be made, enabling payments to providers to be spread across the duration of a course, and paid in arrears.
The bill provides the Commonwealth with the discretion not to pay a loan where it is satisfied a student is non-genuine or where it suspects the approved provider is not complying with the conditions on its approval or the provisions in the bill.
The bill also expands the circumstances in which debts can be remitted and explicitly prevents providers from pursuing outstanding debts from students where their loans have been cancelled.
In circumstances such as unacceptable conduct by a provider, or if the provider's noncompliance has adversely affected the student, or if it is shown that the student is not eligible or not genuine, the secretary has the discretion to recredit the student's FEE-HELP balance without the student having to apply.
In all cases where a debt is recredited, the provider will be required to pay this amount to the Commonwealth.
The bill will retain the provisions to allow the sharing of information with other Commonwealth agencies, such as the Australian Competition and Consumer Commission (the ACCC) and national and state based regulators, to ensure action taken in relation to VET student loans is considered for breaches of other regulatory arrangements.
Tuition assurance arrangements will be strengthened and will continue to be a requirement for approval as a provider.
The bill provides greater protection to students in the event of a provider ceasing to provide a course by imposing obligations on the body that has agreed to provide the tuition assurance.
To further strengthen student protections, the government intends to establish a VET student loans ombudsman, and will provide further information on this in due course.
Ensuring cohesion between the shared elements of the Higher Education Loan Program, or HELP, is critical as students move between the higher education and VET sectors throughout their education experience.
That is why the bill retains the repayment measures in the Higher Education Support Act 2003 to maintain repayment consistency with the rest of the Commonwealth's Higher Education Loan Programs.
The current student's lifetime loan limit, repayment thresholds and rates, and the loan fee will continue to apply to VET student loans and will be considered in the totality of HELP reform.
Any future changes to either of these arrangements are expected to be applied consistently to both FEE-HELP and the new loan program.
VET Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016
The package of VET student loans legislation also includes the VET Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016.
This bill effectively closes off the VET FEE-HELP loan scheme for new student loans from 1 January 2017, and new VET FEE-HELP provider approvals after 4 October 2016.
It also establishes transitional arrangements for existing VET FEE-HELP students, and currently approved VET FEE-HELP providers.
Arrangements for existing students
Genuine students with existing VET FEE-HELP loans for courses they have yet to complete will be given the opportunity to continue their studies with existing providers under their existing VET FEE-HELP arrangements until the end of 2017.
These students will need to confirm they are active in their courses and wish to continue during 2017 with access to VET FEE-HELP.
Over the coming months the department will be contacting all existing students to advise them of the required arrangements by which they can opt in to be 'grandfathered'.
The student must have enrolled in the VET course of study and accessed VET FEE-HELP for a unit of that course before 1 January 2017, and the secretary of the Department of Education and Training must be satisfied that the student is a genuine student.
The bill sets out that a student is not entitled to VET FEE-HELP assistance on or after 1 January 2018 and it is expected that after this time, students who have yet to complete their course will need to transfer to the new VET student loan scheme to complete it, or to another provider if their current provider is not approved to offer VET student loans.
Following the government's changes to VET FEE-HELP to limit debts being levied in line with student progression, students should be paying using a VET FEE-HELP loan only for units which have a census date by the end of 2017. No VET FEE-HELP liabilities will be incurred by students after 2017.
Arrangements for providers
The consequential and transitional bill sets out that the minister (or delegate) is precluded from approving any new VET FEE-HELP providers after 4 October 2016.
The Commonwealth will cease the assessment of current applications for VET FEE-HELP provider approvals.
The bill also provides that universities (table A providers and table B providers under the HESA), as well as TAFEs and other publicly-owned registered training organisations (RTOs), that are currently approved as VET FEE-HELP providers, 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 next year.
Other RTOs that are currently approved as VET FEE-HELP providers can be approved for the purposes of the VET student loans program for the provisional period from 1 January to 30 June 2017, if the secretary is satisfied that they meet transitional suitability requirements.
Current VET providers that do not 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 2016 as normal—with any such approval not commencing before 1 July 2017.
This will ensure that provisional approval is provided only to suitable providers during the transition period.
Current approved VET FEE-HELP providers may continue to deliver training with access to VET FEE-HELP for existing students until 31 December 2017. This applies regardless of whether they are entering the new program, and is in place to ensure continuity and minimal disruption to existing students at those providers.
Other consequential amendments
The bill also makes consequential amendments to the Higher Education Support Act 2003, the National Vocational Education and Training Regulator Act 2011, or the NVETR Act, and the Student Identifiers Act 2014 to assist in the administration and enforcement of the VET Student Loans program.
Amendments to HESA are required to provide for loan debt calculation and repayments arising from the granting of VET student loans under the VET Student Loans Act.
The NVETR Act is amended to make it clear that it is a condition of a provider's registration under that act that it comply with the HESA and the VET Student Loans Act.
This will clarify the capacity of the National Vocational Education and Training Regulator (the Australian Skills Quality Authority) 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.
VET Student Loans (Charges) Bill 2016
The package of VET Student Loans legislation also includes the VET Student Loans (Charges) Bill 2016.
The bill establishes an annual charge on providers as a tax, to help recover some of the costs associated with administering the new VET Student Loans program.
The waste, rorting and damage to vocational education simply cannot continue.
The government calls on its parliamentary colleagues to work with us to help ensure the new VET Student Loans program is legislated as quickly as possible to enable it to start as intended on 1 January 2017.
In getting us to this point I want to thank the member for Cowper and Senator Scott Ryan, both of whom worked tirelessly in their former roles as ministers for vocational education and skills.
I commend this bill.