The peak body representing TAFE colleges is headed for a bitter dispute with the federal government as the latest twist in the training loans debacle threatens to send it and its private counterpart to the wall.
The two organisations, TAFE Directors Australia and the Australian Council for Private Education and Training, face enormous payouts to the students of colleges that collapsed amid the fallout of the VET FEE-HELP loans scheme.
The Education Department says the bill has already reached $19.7 million and could skyrocket from there. TDA says the department should pay the bulk of it, and has foreshadowed legal action, and ACPET says the government precipitated many of the college bankruptcies by changing the rules midstream.
Both groups run consumer protection schemes for students of colleges that cancel courses or close their doors. These “tuition assurance” schemes must find alternative providers for the students, or, if that proves impossible, must refund fees paid for subjects they have not completed.
Colleges were obliged to join one of the two schemes to qualify for VET FEE-HELP loans covering their students’ tuition fees. Students were required to repay the loans through their tax once their earnings reached a threshold that is now at about $55,000 a year.
VET FEE-HELP was scrapped at the end of last year after mass rorting blew the cost of the scheme to about $8 billion. Dozens of colleges crashed after losing access to the loans or after regulators took action against them for breaching training standards or for misleading consumers.
They included Careers Australia, which amassed $430m in loans in 2015 and last year before it went into receivership in May this year, leaving 15,000 students stranded midway through their courses.
The government has now moved to assume control of tuition assurance arrangements next year. Education Minister Simon Birmingham said ACPET and TDA had taken “risks” with some of the colleges they backed.
“We could no longer be certain (they) would be able to protect future students,” he said, adding that the two groups would have to pay out their existing obligations.
They are negotiating with the department over the parameters of those obligations.
A key point of debate is whether refunds are payable to students who were supposed to have finished their courses before their colleges collapsed. Also at issue is the extent to which the two groups’ obligations were erased by the government’s failure to enforce the loan scheme’s rules, and by sudden policy changes that triggered dozens of college collapses in 2015 and last year.
Yet another question concerns obligations to students who failed to accept invitations to have their study arrangements “grandfathered” after VET FEE-HELP was abolished. Borrowers received invitations if they had enrolled since 2009 and had not completed their courses by December last year.
About 86 per cent did not take up the offer, suggesting the vast bulk had no intention of completing their courses and many were unaware they were even enrolled.
Careers Australia was a member of TDA’s tuition assurance scheme. TDA says it has organised alternative placements for about 2000 former CA students.
Another 2500-odd are seeking refunds.
TDA believes its refund obligations extend only to students whose training “end dates” were after CA’s closure in May this year — rendering it liable for $700,000 at the most. But it says the department’s different interpretation of the rules would expose it to payouts totalling at least $17.5m, beyond its reserves and insurance coverage.
TDA chief executive Craig Robertson said his group had the “high moral ground” in a dispute that had been simmering since June. He said a payout of the magnitude implied by the government would be in breach of the scheme’s rules and unfair to its insurers.
He said: “We’re going to finish this process before Christmas and hand it over to the department. If they want to disagree, we’ll see them in court.”
He said students were the victims and “the commonwealth has a moral obligation to come up with some sort of deal for them”.
ACPET chief executive Rod Camm said his agency would not resile from its obligations. “The question is how many students are legitimate and how many you can find. Students have got a right to a re-credit of their debt based on a breach of consumer law, but that doesn’t mean it’s a debt that’s attributable to the tuition assurance.”
The department said the two groups had been offering tuition assurance since 2009 and had collected “substantial fees” from providers. “The government now expects (them) to meet their obligations,” a spokesman said.
Former Education Department bureaucrat Mark Warburton, who helped design the original loan scheme, said the tuition assurance schemes had been established on the basis that “there would be decent regulation with bona-fide students and reputable providers concerned about their students’ education”.
“The department didn’t take regulatory action when it was required. There was plenty of power to stop or slow down these providers in 2014 and 2015, when things were obviously getting out of control. Now TDA and ACPET are being expected to carry the can.”
Grattan Institute expert Andrew Norton said tertiary education organisations traditionally had been reluctant to litigate against the commonwealth. “But when the stakes are so high, this could end up in court.”