For three years the federal Coalition government ignored a major loophole in the VET FEE-HELP student loan scheme that allowed dodgy private colleges to scam the program and fraudulently enrol students by accessing their tax file numbers.
An Auditor-General's report on the failed loan scheme, released Tuesday, said that VET FEE-HELP scams cost the taxpayer $1.2 billion in 2014 and 2015 alone, equivalent to a quarter of the loans issues in the two years.
Auditor-General Grant Hehir also said that until the end of September this year the Australian Taxation Office (ATO) was giving colleges tax file numbers of people whom colleges claimed were legitimately enrolled in courses and eligible for a loan, without any confirmation from the student.
The revelation undermines the Coalition's argument that Labor bears all the blame for the VET FEE HELP fiasco, which the report compares to two other Labor-initiated schemes – the pink batts fiasco and the National Rental Affordability Scheme, which allowed cheap rent subsidies to benefit fee-paying international students at universities.
The practice of passing tax file numbers to colleges was shut down only at the end of September this year, three years after the Coalition government was elected in 2013.
Shonky colleges were able to use the loophole to obtain tax file numbers and fraudulently enrol students, possibly without their knowledge, in the student loan scheme.
They would then be paid tuition fees by the government which the "student" was required to repay through the tax system when their annual income rose above a threshold, currently $54,869.
The report found that some students, who found themselves with a loan debt, had stated on oath that they had not given either a college or education broker their tax file number.
The report, titled Administration of the VEE FEE-HELP Scheme, said the ATO had responded to thousands of tax file number requests from colleges since the loan scheme started in 2009, some of them listing up to 200 students whose tax file numbers were being sought.
The ATO was authorised to hand over the tax file numbers under the Higher Education Support Act 2003, which governed the loan scheme.
The report from the Auditor-General also said that an additional $1 billion in VET FEE-HELP loans processed in 2015-16 is unlikely to be repaid because the recipients are unlikely to earn more than the loan repayment threshold.
The report poses many questions about the effectiveness of Education Minister Simon Birmingham, who first took responsibility for the VET FEE-HELP scheme two years ago when he was appointed Assistant Minister for Education and Training.
Although he immediately moved to shut down some of the loan scheme rorts, the report shows that others went unaddressed.
In a statement on Tuesday Senator Birmingham again blamed Labor for the fiasco and said the findings of the Auditor-General's report would be taken into account in the new VET Student Loans scheme, which replaces VET FEE-HELP from January 1.
He said there was now a specialist student complaints team in the Department of Education and Training to investigate and resolve issues faced by students.
"So far the department has helped get more than 1,835 HELP debts fully or partially recredited since May this year worth around $16.8 million and we have joint court action with the ACCC against four different providers," he said.
But the Auditor-General's report said that until September this year "the department's websites had not provided clear information on the types of complaints that it would investigate, and encouraged students to contact other agencies without outlining the types of complaints these other agencies were able to investigate".
Many complaints went into a black hole. Of 839 complaints received about the loan scheme in 2015, 703 (as at 28 April 2016) had no follow-up action of outcome recorded.
"Advice from [the] Education [department] was that it considered a complaint to be handled adequately if it did not hear back from a student," the Auditor-General said.
The report said other shortcomings of the department included:
- Putting growth of the scheme ahead of integrity and accountability.
- Not paying sufficient attention to "risks identified in a regulation impact statement".
- Inadequate monitoring, investigation and payment controls for poor or non-compliant [education] providers."
- Until 2016 there was little analysis or internal management reporting to identify emerging problems".
- There were no arrangements with the regulators – the Australian Skills Quality Authority and the Australian Competition and Consumer Commission (ACCC) – to swap information about low quality or unscrupulous colleges.
- Not effectively controlling payments to colleges. The payments system relied heavily on the knowledge of a single staff member.
- Not acting soon enough to warn students about dodgy colleges.
So far the ACCC has taken court action against four colleges for ripping off students through VET FEE-HELP.
