State of the Industry Survey

As a lot of you know back in the early part of the year I created a state of the industry survey for the VET sector, and, and I am really grateful for this lots and lots of you took the time to fill it in.  I then shared the views and information that the survey had captured and also use it in a number of submissions and discussions with various people and bodies.  I was thinking today that with all of the changes which have occurred over the last six months (and it was always my intention to do these every 6-12 months) it might be a good time to do this again and to see what everyone thinks.

Now most of the questions are the same because it, well makes it easier to compare the data then, but there are also a couple of new ones and a couple that I have left off this time around.  So if you want to be involved and you want to shared your views on the sector no matter what part of it you are from I would really appreciate it if you would click on the link below and fill out the survey.  I will leave it open for about 2 weeks of so depending on how the level of responses goes and then I will sort through all of the data and let you know the results.

So here is the link    VET State of the industry survey November 2016

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Doom and Gloom or an opportunity to Bloom – VET student loans scheme

So they say a week is a long time in politics and this last week has been a cracker for so many reasons.  The only one I am going to talk about today though is the Vet Student loan scheme which Minister Birmingham announced last week.  Today we saw the release of the eligible courses list for the new program with around 350 programs making the initial list, though there is room for submissions for the inclusion of other programs to be made and these close on 23 October.  Enough about that for the time being, I will come back to the list a little bit later.

There has been a lot of criticism, some of which I think has justification, some of which I don’t think does.  What there has been is a lot of doom and gloom and a lot of talk about the government ruining people’s businesses.  We even saw AIPE go into voluntary liquidation on Friday.  What cam to my mind when I was listening to all of the discussions, most of which will continue I think for at least some time yet, was how it all linked to some of the things I have often talked about in terms of business models and the business of vocational education.  I have heard an number of people talk about the fact that their businesses will be destroyed as a result of these changes or at the very least they will have to downsize their businesses substantially.  Before I go on it is really important to say that I feel for these people.  These people have for the most part done the right thing, obeyed the rules and built businesses which provided high quality educational outcomes to their students and the industries they were involved with and at least in some cases the investments they have made in these businesses over the years will be seriously devalued.   What this drives home to me is the important of distributed revenue streams in your business.  Providers who rely to heavily on one source of revenue, particularly when that revenue stream is controlled by the government in some way are always going to be faced with these challenges.  The same can be said of providers who rely entirely on fee for service markets, when the market wobbles, particularly if they are involved in niche areas, so do they.  All of those who are in the business of vocational education, even public providers need to have diversified models of revenue generation in order for them to weather changes to funding models and changes to the market in general.  It may be okay to make hay while the sun shines, but you always need to remember that some days its rains.

There has also been criticism of the tiered or banded system for student loans, with the levels being $5000, $10,000 and $15,000 depending on the type of qualification, although when we look at the draft list which has been released we see that everything but business and commerce it appears will be in the $10,000 band or above.  The criticisms leveled have again be around how providers can deliver the course for the value of the loan the government has put on it.  Now to be fair the government has said that the loan cap is just that a cap on the amount of money they will loan a student to pay for a course.  They have said that providers can charge whatever they want to, but then the student will have to meet the difference between the two figures.  It is also fair to say that there is an argument about access and equity which can more than reasonably be made about having significant differences between the cap and providers fee, the ability of potential students to meet that gap and questions of equity which arise around that.  This is however an argument for another place, suffice it to say here that large difference between the loan cap and the provider fee will make it difficult for those in the most vulnerable and lower socio-economic groups to be able to afford to enter training through this scheme without additional assistance, where providers choose to charge fees higher than the loan cap.  There are of course also counter arguments about appropriateness of qualifications, state entitlement funding and employment outcomes.  Again however a range of these criticisms are tied to the kinds of business models which were encouraged under the old VET FEE Help system.  I know of a number of providers who despite having extensive Certificate I-IV scopes only ever advertised the high revenue VFH courses on their websites and through other media.  They also did not seek to build their entitlement funding or fee for service businesses because there were substantial sums of money being generated through their VFH business operations.  The funding drove the business models, a little bit like the tail wagging the dog so to speak.  One of the reasons why some providers will find it difficult to deliver under this new scheme is that their model of delivery, and student acquisition is one that relied on the continuation of VFH fees at particular levels.

I have often suggested that most, (and it is really important that this is taken for what it is, a generalisation which also acknowledges that there are outlier courses which cost substantially more to deliver), that most diploma level courses can be delivered in such a way as to produce high quality student outcomes and competency for $10,000 or less.  Why do I say this; because less than 5 years ago they were and there was very little if anything wrong with the graduates being produced.  Over 5 years we saw prices of some Diploma level qualifications rise by 300-400% and business models develop which required these increases to be cost-effective.  It is vitally important to note that most of these business model were not flawed or did not seek to rort the system or rip of the government or students.  Their only issue was that they relied so heavily on both VFH and particular levels of funding.  The ability to set fees where ever providers wanted allowed and even promoted providers adopting business models that only worked under a certain set of circumstances.  Are there models which will work under the new scheme?  Certainly there are and I think the suggestion that it will drive all providers to deliver one to many elearning with little or no support are false.  There are solid face to face models which not only can clearly operate under this new model but can also be profitable.

let’s go back to the list then shall we.  As I said earlier the vast majority of programs are at the $10,000 or $15,000 dollar level with it appears only management and commerce at the lower $5,000 level. A lot has been made about the government ‘picking winners’ so to speak and the inequity between someone who wants to study a vocational education course over a Higher Ed course and while there is weight to this argument there is also weight I think to the argument that where the money is being provided by the government, even if that is through an income contingent loan of some description, there needs be a return on that investment in terms of workforce outcomes.  Is, by creating a list, the government saying one course is better than another, no I don’t think this is the case.  I think the government is legitimately saying, one course seems to have better workforce participation outcomes than another and because of that we are going to provide funding for students who want to undertake this course.  The interesting question that arises from this of course is whether it is fair to apply a test like this to VET and not to HE, but again that is a debate for another time.

So why did I call this post Doom and Gloom or an opportunity to Bloom, mainly because I think as with all change this one presents us as providers with a choice.  We can either spend the next few months worrying, complaining and trying to get the government to change it mind, which it may do on small things, but I doubt it will on anything major, or we can look on this as an opportunity to re-energise what we do, consider our business models, look at ways of not just working, but thriving in this new environment.  I will let you guess what I intend to do.

Anyway as always that’s just my opinion.

Massive changes to VET FEE Help – The King is dead, long live the king

While right at this point there has not been a complete outline of what is going to happen it is fair to say that the days of VET FEE Help are over.  The deeply flawed system which most of us have been critical of almost since its inception will be scrapped at the end of the year and replaced with a completely new system for 2017.  If you want to look at what is currently being reported about the changes you can see articles here and here.

What do we know at the moment?  Well it seems from looking through the information that I have a lot of the suggestions that myself and other have made and that I have talked about at length in previous articles (Redesigning VET and reinventing VFH) have made the cut shall we say.  Lets then look at the major changes we know about.

Everyone will have to reapply and there will be tighter conditions for entry

This had to be part of any package of reforms as far as I was concerned.  No package where currently contracted providers were simply rolled over into a new system was ever going to have legs. The old application system and criteria were systemically flawed and concentrated on the wrong metrics entirely when both determining if someone could be a provider and then managing that provider.  Making everyone reapply will almost instantly contract the number of providers because a number of current providers will simply self select out for various reasons and I am certain that the government will not accept contracts with a number of providers who may look at applying.  The idea that Relationships with industry, student completion rates, employment outcomes and a track record in education will all be assessed when deciding which colleges can access the loans program is a breath of fresh air and should have been included in the first place.

A ban on the usage of brokers and cold calling by providers

This is something that had to happen as well, not just because of what brokers have done to the system, but because cold calling random people and hard selling them a $20,000 diploma has nothing to do with educational outcomes and everything to do with making as much money as possible in the shortest period of time.  It has been my opinion for a long time now that the rise of brokerages, and providers willing to use their services, no questions asked shall we say, was the single most significant factor in the issues which arose from VFH.

A three-tiered system of loan limits will be introduced, with loans capped at $5000, $10,000 and $15,000 depending on the cost of teaching the course.

Again this is in my opinion a no-brainer.  I am yet to be convinced and a lot of people have tried, that a diploma of management is worth $10,000 plus. I think a tiered system rather than a flat cap acknowledges that different types of courses require different investments and have different costs associated with their delivery.  What this will do is reign in the costs associated with programs and bring them back to some sort of normalcy, something they haven’t had in a number of years.  Remember in some cases we saw 300-400% rises in course fees over essentially a 5 year period, with, in the vast majority of cases, no changes to costs or content, well except for having to pay a broker 25%.   UPDATE – Loan caps only apply to the amount of money which a student will be provided with by the government to ‘pay’ for their course.  Providers may charge whatever they wish for the course in question and students will be required to pay any difference between loan cap amount and course cost themselves.

Only students enrolled in courses aligned with industry needs and likely to lead to a job will be eligible for the loans.

I have said it before and I will say it again I am sure, vocational education is about employment outcomes and workforce participation and my mind has boggled at some of the courses which I have seen offered by certain providers.  I acknowledge that there are concerns around priority lists and the like, but if we are being honest here just how many personal trainers and counselors do we need to have.  This in conjunction with the tiered payments model should at least, if properly applied mean a much stronger employment outcomes for money invested in income contingent loans.

The new scheme will include tighter conditions so colleges can be paid in arrears and poor performing institutions can be suspended and have their payments cancelled.

All providers will be paid monthly in arrears based on authorised and verified student data. This is something which should have been part of the system from the word go.  Large upfront commencement payments drove the other activities which broke the system.  If there had not been such substantial almost unregulated upfront revenue a lot of the issues which occurred simply would not have happened.

The Fallout

Massive contraction at the Mega end of the market. Those providers with large exposure in their revenue streams to VFH, particularly those carrying a high level of debt which requires servicing are going to be in serious trouble as will any provider who has been used to charging $10,000 plus for a Diploma of Business, whether they are small or large.  Any provider which doesn’t have a diversified business revenue model will struggle to find their feet again and we will I think see a not insubstantial number fold or contract heavily.  If I was a provider who relied on VFH for a substantial part of my revenue, particularly if my dealings with ASQA or the Department had been anything less than favorable, I think I might be a little worried right now.

But anyway that’s just my opinion.