Australia : More than $2bn in vocational loans will remain unpaid due to poor program design being exploited by unscrupulous training providers, the auditor general has found.
In a report released by the Australian National Audit Office on Tuesday, the auditor general found the federal education department did not manage risk effectively, encouraging growth in loans without recognizing the incentives created for providers to sign up vulnerable students.
The report found the uptake of student loans significantly increased when they were extended to vocational education in 2008, peaking at $2.9bn in 2015. It said a “significant” amount of the money loaned would not be recovered, including $1.2bn provided in “inappropriately issued” loans in 2014 and 2015 and a further $1bn raised in 2015-16 that will not be repaid because recipients will not meet income repayment thresholds.
The auditor general said the program was “weighted heavily towards supporting growth in the vocational sector, but an appropriate quality and accountability framework addressing identified risks was not put in place”. The education department “inadequately considered the implications of the changed incentives” for providers and students. The report said the department lacked data analytics capability, internal management reporting or analysis to identify emerging problems.
The auditor general said concerns were raised in 2012 about insufficient safeguards for students and inadequate monitoring, investigation and payment controls for poor or non-compliant providers. Safeguards did not include provisions to prevent misleading prospective students and referral of complaints where people with an intellectual disability had been targeted for enrollment or gifts or incentives were offered.
Compliance activity was “very limited and reactive” until 2015, the report found. The department had little visibility of students entering the system and could not ensure they understood they had taken on a student loan.
The report concluded the vocational loan scheme “did not achieve many of its stated objectives”. Increased participation was not backed up by evidence from the department relating to quality, value and sustainability of the sector.
In its response, the education department said it had addressed the “significant areas of concern” identified in the report, including through improved monitoring and compliance.
The education minister, Simon Birmingham, welcomed the report saying it made clear that “Labor did not effectively design or administer the [vocational loan] scheme despite various warnings”.
This report clearly spells out the extent of the mess Labor made of [the vocational loan scheme] which opened the floodgates to shonky providers who ripped off vulnerable students and taxpayers.”
Legislation passed in December, to apply from 1 January, will:
— Limit loans to courses with a high likelihood of leading to jobs
— Set loan caps depending on courses’ delivery cost, up to $15,000
— Require students to access an online portal to ensure they are active and legitimate enrollments
— Feature a new application process for providers wanting to access student loans with a higher bar to entry including assessment of their track record
— Strengthen compliance conditions including the ability to cap provider loan amounts and student numbers
— Provide powers to suspend poor performing providers from the scheme, cancel their payments and revoke their approval
— Prohibit approved providers from using “brokers” or directly soliciting prospective students and limiting the subcontracting of training.
Birmingham said the changes would mean training providers had met tougher benchmarks and taxpayers could have confidence the loans were “for genuine students, learning skills that will contribute to the economy and increasing the likelihood the loans will be repaid”.
Before the election Labor had proposed tighter loan caps, limited to $8,000 with exemptions for high-cost courses to crack down on dodgy loans.
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