How most vulnerable were used to rort billions

ROGUE operators drained billions of dollars in public funds through the vocational education system after a failed attempt to open the sector to the free market.

Education Minister Simon Birmingham likened the failed scheme to the ill-fated Pink Batts program, after government funding for student loans shot up from $26 million in 2009 to $2.9 billion in 2015.

Changes to the system in January, 2013, meant private training providers could effectively name their price for diplomas and advanced diplomas.

The Federal Government would pay the providers, covering the cost of the course, until students earned enough money to pay back their loan, similar to university HECS debts.

Training providers were also required to provide a pathway for diploma and advanced diploma students into university degrees through course credit transfers from the provider to a university, to push more people from vocational education into higher education.

But that requirement was scrapped as part of the changes.

The result was a spike in student enrolments from 55,000 in 2012 to more than 272,000 in 2015 while approved providers, both public and private, increased from five in 2008 to 282 in 2016.

A change in Federal Government occurred in 2013, but reform of the loan system wasn't seriously tackled until 2015.

The system has since been scrapped altogether, Mr Birmingham explaining it was the only way the government could fix the system.

The cost of the loans system was significant. An Auditor-General's report shows government estimates of $1.2 billion in loans issued in 2014-15 would not be repaid, as many of the loan recipients weren't expected to earn enough to make minimum repayments.

Victoria University's Professor Peter Noonan, a higher education expert with the Mitchell Institute, explained why the system became so attractive to providers.

"VET FEE-HELP is a source of immediate and direct revenue for providers who share none of the risks or costs of debt repayment," he wrote in 2016.

"Where excessive fees have been charged, and inappropriate enrolments undertaken, Commonwealth payments to VET FEE-HELP providers are never likely to be repaid, representing a 100 per cent course subsidy from the Commonwealth to the provider."

The Australian Competition and Consumer Commission has started court proceedings in the past two years against some of the largest training providers in the country, alleging predatory sales practices being used to enrol students including inducements like free laptops, equipment or otherwise misleading students about debts incurred.

Training providers only had to sign students up and ensure they hadn't dropped out before census date (usually about three weeks after a student enrolled), to trigger the first of their government payments for the student's loan, with no minimum level of training quality or graduation rate required.

From January 1, 2017, the Turnbull government replaced the failed loan system with VET Student Loans, in a bid to stop the rampant rorting within the sector.

"The 2012 changes Labor made to VET FEE-HELP opened the scheme up to rorting by unscrupulous providers and that had an immense human cost in remote communities, older Australians in retirement villages, Australians with disability, who are amongst the many vulnerable people who have been targeted," Education Minister Simon Birmingham said.

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