Back on the horse – comment by CEO Craig Robertson

It was pleasing to see Skills ministers agree Friday week ago to review VET Student Loans.

Loans for vocational education were legislated as VET FEE-HELP (VFH) in 2007; the last Act in John Howard’s Prime Ministership. The scheme kicked off proper in 2009 with VFH providers needing articulation agreements into higher education for the courses to be eligible for loans. The objective was to grow the proportion of the workforce with higher level skills.

VFH started slowly because of the lead time for articulation agreements and the slow approval process. In 2012, as part of a new inter-government agreement to introduce demand driven entitlement to Certificate level courses, VFH conditions were loosened. No articulation agreement, first among them. Students incurred an immediate 20 per cent loan fee unless they were enrolled in a state or territory subsided course – students benefitted by following priorities set by states and territories. The rationale was to open access to this level of VET as a strong equity measure, and to encourage private training activity by using loans to mitigate the barriers caused by high upfront fees.

The VFH horse bolted – out of control and in ways no one ever contemplated. There’s been plenty of column inches on that one. VSL replaced VFH in 2017, and participation at this level of VET tanked. VSL loans are around $300 million each year for about 58,000 students. Reasons are as many as bets on a race, but chief among them must be the limits on the loans.

Given VFH experimented with de-regulated fees it reasonable, expected almost, for the Government to limit loans, and thereby regulate fees. (The Government may say fees remain unregulated because there are still options for direct student contribution, but this mocks the purpose of student loans in overcoming upfront fees, and there’s very little private contribution in practice anyway.)

Fee regulation means the government needs to have a good idea of costs of delivery lest the loan over-shoots, giving a bonus to the provider at the expense of the student, or under-shoots at the cost of the provider, although ultimately the student because the provider has little option bar cutting delivery. Remember, the logic of the consumer (student) arbitrating quality and calibrating price was proven ineffectual in the face of the slick sales jobs of charlatans.

Enter Steven Joyce, followed by the National Skills Commissioner and the Productivity Commission. Joyce has suggested, and the commissioner and commission tasked to come up with a consistent national price for VET qualifications, and move even toward university funding rates.

Let’s look at one qualification – Diploma of Remedial Massage – the seventh most popular course in VSL with a maximum loan of $10,342. It has 16 core and five optional units with about 1700 nominal hours plus 200 hours compulsory work placement. Nominal hours represent the training effort for the qualification and are set by experienced curriculum designers. NCVER says a full-time load is 720 hours, so it’s at least a two-year full-time course, with the provider receiving $5,170 per year for each student. Assuming 12 per class as the limit for a practice-based qualification like this one and the provider has $62,040 to run it for the year! That doesn’t even pay for a full-time teacher.

Am I exaggerating the requirements of the qualification? Look at the unit with the highest nominal hours – Provide Remedial Massage Treatment. It has 18 separate elements of performance which need to be demonstrated and 62 separate items of knowledge the student must acquire, before even basic physiology and anatomy. If ASQA audits this unit, it has at least 80 points it can test for compliance, before it considers the efficacy of the assessment tools, the application of foundation skills or testing inputs such as unit duration.

Is the qualification important? According to Australian Industry Skills Committee data, the number of massage therapists has grown from 3,300 in 2000 to 19,900 in 2018 with 23,900 predicted for 2023. Remedial massage is bound to follow the same trajectory.

Is the twenty per cent loan fee justified? MySkills tells us the average full-time salary for Remedial Massage is $46,500 and the repayment threshold for the loan is $45,881. Graduating students start repayment straight away. Any argument for the loan fee to remain because of poor employment or wage outcomes weakens any claim that VET is the same as higher education or has the Government diluting the merits of qualifications they endorse.

Where to start? I encourage the Commonwealth to get back on the student loan horse.

Oh, and if universities were paid to do the qualification – they’d get $13,073 in subsidy and $9.395 in student loan…. each year!