Private VET doesn’t actually cost 7 times public VET!

As most of you know there has been a story doing the traps that Private vocational education costs 7 times more than public VET.  When I first saw this story last week it was just after the Queensland Budget papers had been released and according to the QLD figures which I looked at in my last post the cost to the QLD government of all funded training was around $525 per unit of competency, while the cost per unit of competency for TAFE delivered training only was $799 per unit of competency.  The average cost to the QLD government for a qualification across the board was around $3500.  Yet if we are to believe the figures quoted by The Greens and the SMH it seems that ‘Taxpayers forked out $73,200 per graduate from private colleges on average, but only $10,500 per graduate in TAFE courses in 2014‘.  Now when we look at these two sets of figures they seem to be diametrically opposed, one set of  figures, from the QLD budget papers seems to be suggesting that delivery by the non-public sector is at least one third more cost effective than it seems to be at TAFE (please read my last post as there are some important caveats on this).  The other set of figures seem to not just be saying the opposite but something exponentially opposite.  So which set of figures represents a true or truer image of the costs associated with VET be it delivered publicly or non-publicly.  Now to be completely fair, both sets of figures are both true and not true at the same time, and given the current media bias against the VET sector and the fact that The Greens VET policy is one designed to eradicate non-public VET it is no wonder that the headline private vocational education costs 7 times more than TAFE has been quoted in every paper around the place, with very little checking of the facts behind the statements.

Last week when I talked about the QLD budget I stressed that there may be quite legitimate reasons why delivery through the QLD public provider might in fact seem higher than non-publicly delivered courses.

When we look at the set of figures produced by The Greens, however we see something different, what we see is a packaging of data which shows a lack of understanding of both the data itself and the sector and then the use of this data  to not just cast blame where it is deserved, that is on those providers who were doing the wrong thing, but across the entire non-public sector as a means to support their policy on Vocational Education.  So lets take a look.

To start off, there are some very important pieces of information which are vital to being able to understand the problem with the 7 times assertion which most of us with the sector already understand and they are;

  1. VET FEE Help programs accounted for only 6% of all VET programs in 2014
  2. Only 5% of all RTOs (both public and private) are VET FEE HELP providers
  3. 43% of all VFH enrolments were done by the 5 largest VFH providers, Evocca, NSW TAFE, Careers Australia, Study Group and AIPE
  4. The 10 largest VFH providers account for 55% of all VFH enrolments
  5. The 4 largest VFH  providers each have enrolments double or more than the number of enrolments for the fifth largest provider

In fact if we are to simply look at those providers who have been or are being investigated by the ACCC we see that they alone account for $420 Million and if we add in the amount paid to Evocca the number approaches 3/4’s of a billion, out of a total spend of about $1.7 billion.

Enough background though, lets explore how exactly The Greens came up with their figure of 73,000.  Well that is easy if you download chapter 4 of the  2014 vet fee-help statistical report and you take the total VFH spend ($1.7 billion) and divide it by the number of students graduated (23,000) which gives you the figure that The Greens and there of course you have the first and one of the single biggest problems with the figure.  Anyone with the barest understanding of how VET data is collected and what it means knows that there is both a lag in the data and that in a lot of cases students take more than 12 months to complete a diploma level qualification.  What this means of course, given that payments are made on commencement of study not completion, a provider could have enrolled a student in all of the units associated with a course and been paid for those units well before the student has completed them.

So lets investigate this a little bit further though.  It seems to me when we look at the data mentioned above that The Greens may have made quite a serious mistake in terms of their calculation.  On sorting through the figures for both VFH fees and VFH completions, it looks like all of the TAFEs across Australia received a combined total of $257 million in VFH fees and there were 5755 VFH completions, which gives a cost per student of $44, 656 rather than as has been claimed something around $10,000.  Now if the people who did this work for The Greens or anyone else would like to challenge my numbers or show me how they got theirs I am more than happy to be corrected, but on the available figures from the department it looks like when you combine all of the TAFEs they got around $45,000 per student in VFH fees.

Now onto the next point.  As I said above vast majority of VFH fees were paid to a very small number of providers (7 providers out of 250 VFH providers) all of which have recently been investigated by the ACCC or other bodies around there student practices.  These seven providers account for around $750 million of the VFH fees paid.  As a combined group they graduated about 3030 students (It needs to be noted that I am simply using the method of calculation here that was used in the original report) which means that for this group the cost per graduate, in terms of VFH fees paid was about $248,000.  Now no shying away from this that is an appalling figure and unjustifiable in any realm of the imagination, which of course is why  investigations and prosecutions have or are in place around these providers.

However when we remove this very small group of providers from the total mix something very interesting happens to the figures.  The total amount of fees paid all non-public VFH providers excluding the seven in question (about 245 give or take) was about $691 million.  The total number of students graduated by this group was 14,800.  Now if we as we have done previously dived the total fees paid by the number of graduates we get, wait for it $46,600, about $2000 more than the figure for TAFE.

Now I need to be clear here, I am not defending in any way the unconscionable acts of a small number of providers or the very poor completion and progression rates of this same group, all I am saying is that to calculate things in the way the Greens have shows a lack of understanding of both how data is collected and how the system it self works and when the group of providers who were the largest users of VFH fees are taken out, the figure for non-public is well pretty much the same as that for TAFE (particularly given that I think the number for TAFE is much higher that what is being quoted by The Greens.   So really all this data  shows is what everyone has known for a while now,  5% of non-public providers who delivered VFH courses, seem to have done  the wrong thing and sucked up massive sums of money and now (at least for some of those providers) are being held to account.  I mean the way the Greens and the SMH cut it, it makes for a good headline but in reality that is about all it is.


Anyway that’s just my opinion.

About pauldrasmussen
Paul Rasmussen is one of Australia’s most widely read Vocational Education and Training Commentators. He provides deep, unbiased analysis and insights not only on topical issues, but also on the underlying structure and policy which supports the industry. His writing and analysis has been praised for its uncompromising and thought provoking style and its ability to focus on the issues of real importance to the sector. He has advised various government departments and ministers, training providers, public and private organisations, not for profits and small to medium enterprises on the VET sector and the issues and opportunities facing it. He is one of Australia’s most awarded learning professionals and a regular speaker at a range of conventions and forums. His extensive experience in vocational education, and learning and development coupled with formal qualifications in philosophy, ethics, business and education management allow Paul to provide a unique view of the road ahead and how to navigate it.

3 Responses to Private VET doesn’t actually cost 7 times public VET!

  1. Boris Kelly says:

    Excellent and very useful analysis of this important issue. Thank you, Paul!.

  2. Boris Kelly says:

    Paul, a key point implicit in your analysis is the difference between government funding and VET FEE HELP, the latter being an income contingent loan scheme. The greater proportion of VFH loans will be repaid. If the income threshold is lowered, as I believe it should be, the quantum of loan repayments will increase as students start repaying sooner and default rates are lowered. Andrew Norton from the Grattan Institute mounts a convincing case for this.

    The government “spend” on VFH funding amounts to cost of administration, borrowing costs plus unpaid debt. The government’s 20% administration fee charged on each VFH loan is designed to offset the costs. Further measures may be put in place to mitigate the risk of bad debt e.g. recovery from deceased estates, offshore recipients and a superannuation payment option.

    VET FEE HELP is not a subsidy. As a rule, government does not require repayment of subsidies e.g. CSPs in higher education, Smart and Skilled etc. Properly administered and regulated, the VFH scheme provides value to all stakeholders, especially the tax payer.

    The ALP and Greens VFH policies are ideologically driven absurdities. Sections of the media – especially Fairfax and the ABC – have, in my opinion, been complicit in supporting these policies through poor reporting.

    One final point: We should be vigilant in preventing compound interest ever being applied to student loans, as is the case in the Title 4 system in the USA. The Coalition’s 2014 budget earmarked this as an area of reform. I’m sure the banks would love to get a piece of this action. It should never, ever be allowed to happen.

    Thanks again.

    • pauldrasmussen says:

      Boris, I agree with you completely and the points you make about the difference between VFH and government funding are vitally important and completely ignored by the Education Unions, The Greens and ALP. I also agree that the idea of compound interest on VFH are a definitively bad idea.

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