What would a cap on VET FEE HELP loans achieve?
June 28, 2016 Leave a comment
There has been a lot of talk during this election campaign (relax everyone it will all be over on Saturday) about reforms to VFH and in particular the Labor idea of capping VFH loans at $8,000. I thought today I might have a little bit of a think about what this might do, how it might effect the sector and more importantly how it might effect prospective students trying to undertake Fee for Service Training (which is what VFH is for) if Labor is successful at the election and implements this policy.
Before we have a look at this idea there are a couple of things that it is important to know about VET FEE HELP (VFH).
- VFH is not government funding
- VFH is an income contingent loan, from the government to the student
- VFH is designed to assist student not eligible for government funding to access training
- VFH is therefore a loan to cover the costs of FEE for Service training
- There are less than 300 VFH providers across the entire VET sector
- Not all VET courses cost the same to deliver.
Why are these things important to know before any discussion of caps on VFH loans can be undertaken? The reason is simple, VFH is aimed at a very particular market, a market which up until its introduction were forced to find ways to fund the training they wanted to undertake without (in most cases) any government assistance. This meant that potential students needed to utilise credit cards, personal loans and other forms of credit or payment plans to facilitate their ability to undertake higher level courses, in particular those courses which were not viewed as high priority by the various state governments or where the student didn’t meet the eligibility requirements for direct funding.
To give you an example. In Queensland the State Government provides funding for the Diploma of Community Services where the potential student does not currently have a Certificate IV or higher and is currently working in the community sector. A career changer who had a certificate IV in building and construction (about 8 years old), but due to injuries and other issues wanted to transition from that sector to the community services sector. They had secured a role with a community sector organisation but were not eligible for funding to complete the diploma. As a result they needed to either fund the qualification themselves, get their employer to fund it or use the VFH system. This is a very typical example of the kind of situation that legitimate users of VFH found themselves in.
Of course the easy ‘solution’ here, would be to say something along the lines of ‘well the government should just fund all vocational education for everyone.’ The problem with this solution however is the cost, or more particularly the cost vs outcome/benefit equation. But that is an entirely different argument best left for another day.
Currently the average cost for a diploma of community services is around $10,000 (if you look around you can get a good quality program from around $5,000 and the most expensive is about $15,000). If the cap as Labor envisions it sits at $8,000 that means that even for an average priced course the potential student would still have to find $2,000 out of their own pocket in order to be able to undertake the course. This of course assumes that nothing would change if a cap came into force.
The real question here though is, is that case? Is it really sensible to think that nothing would change if there was a cap of $8,000 in place for VFH loans? What are the various options that could occur if a cap like this was instituted let’s think about that for a moment. There are some Diploma level courses where it can be legitimately argued that the costs of delivery of the course are more than $8,000 and therefore to successfully deliver the course and get the right outcomes course fees would have to not collapse back to the cap limit. They may reduce somewhat, but not substantially in these cases.
There are also however, a range of diploma level programs where the costs of delivery and the fees being charged are not, I would argue in sync. I and others have argued at length in a range of forums that it seems something around the $10,000 mark appears to be a reasonable figure for a wide range of Diplomas. However, even if we accept the $10,000 premise and providers dropped their current offerings down to that level, as mentioned above, it would still leave the consumer, the potential student needing to find $2,000 from elsewhere. It has also been argued that not much has changed in terms of delivery and assessment of programs since VFH was introduced except the price, so we will I think see a large number of those higher price providers drop their prices down to the limit of the cap. We will also see premium services attempt to arise, where some providers attempt to set themselves up as a premium service (whatever that might mean) and charge accordingly. The real question here is would a model of this nature work in a sector where essentially two qualifications are identical regardless of provider.
One thing I am really concerned about with a policy like this is the rise of something akin to Vocational Education credit providers. I can see one of these online or payday style lenders seeing an opportunity and rebranding or marketing themselves as providers of VET loans to cover the difference between VFH and the costs of the course.
The question then becomes is this a good policy? I can see the point of it certainly or at least why it looks politically attractive. The problem is of course that as with a lot of policies around this sector it is a hammer, a reactive response designed to nail one problem without any consideration for any possible unforeseen fallout for everything else. But hey that happens a lot around here doesn’t it.
So anyway that’s just my opinion.