VET Student Loans Update: A For-Profit Provider Closes – What’s Next?

Dr Don Perlgut, CEO Community Colleges Australia, 29 May 2017

It’s a salutary lesson in business models.  Rely on one source of funds for the majority of your funding – especially government funding, and you are at risk. Target vulnerable students in the search for profit, and it will catch up with you eventually.

So it did for Careers Australia, which last week announced in a late night text message to its students that, "All activities of Careers Australia Group are suspended. No classes, no workplaces effective immediately. Further information will be provided." The impact: 15,000 students at 14 campuses across the country have lost their educational provider and their courses, along with 1,000 staff.

The reason for the collapse of this private for-profit vocational education and training (VET) company – one of the largest in Australia: it did not receive approval to become a VET Student Loans provider, after years of collecting many millions of dollars through its predecessor Commonwealth Government loans scheme, VET FEE-HELP.  (*See the facts about Careers Australia below.)

Should anyone – least of all the owners of Careers Australia – have been surprised about the Commonwealth Department of Education and Training’s refusal for participation in the new scheme? I don’t think so, as complaints about Careers Australia have been around for some time, and in December of 2016 the company sacked 150 staff.

The number of “approved providers” for the new scheme is low, and apparently purposefully so. The abuses under the previous scheme mounted for years, and the Commonwealth Government acted late last year to replace it. The new list is mostly made up of TAFE (government providers). There are, as of this writing, no community education providers on the approved list, although there are a small number of not-for-profit organisations.

If so much of the VET FEE-HELP scheme served to support the activities and profit margins of private for-profit VET providers (such as private equity company White Cloud Capital, the owners of the now-defunct Careers Australia, see below) what is the real purpose of the VET Student Loans scheme?  Like the original intention of VET FEE-HELP, VET Student Loans is supposed to make study more accessible, although only for “eligible courses at the Diploma level or above”.

The Commonwealth Government appears to have successfully weeded out the unscrupulous for-profit providers, an excellent result for both public policy and public funding. This was necessary, but it is not sufficient for Australian skills policy.

But how does the VET Student Loans program fit into overall skills training policy for Australia and Australians? Who will benefit the most from this new scheme? (Mostly metropolitan TAFEs, so far.) Why is it focussed solely on higher qualifications, and why does Commonwealth funding and programs mostly ignore lower level qualifications (Certificates IV, III and below)? What does the new scheme do for regional and rural skilling? (Not much.) In other words, what’s next?

The recent budget announcement of the “Skilling Australians Fund” is a start, but it focusses on traineeships and on apprenticeships, which make up less than 20% (about 300,000) of the 1.4 million government-funded VET students.  Discussing the Budget announcement in The Australian (17 May 2017), Francesca Beddie writes:

“Elevating apprenticeships is fine. But tinkering with the training packages isn’t the answer for the rest…. One way … is to embrace policy coherence. VET can’t be asked to produce higher skilled graduates when the policy settings are against it.”

It’s time for the Australian Government to articulate a comprehensive policy for vocational education, training and skills – one that includes the contribution of the community education sector, which has been ignored in all latest policy announcements.


*The Facts About Careers Australia

According to The Australian (Julie Hare, 26 May 2017), Careers Australia:

  • Racked up more than $500 million in government-subsidised student loans in three years.
  • Was among the most aggressive recruiters of students under the now-dumped VET FEE-HELP loans scheme, with almost 30,000 students enrolled in 2015.
  • Not a single student enrolled by the college in 2011 had finished by the end of 2014.
  • Just 10% of the 2012 cohort and 13% of the 2013 group completed (Australian Government Department of Education Training figures).
  • The company’s owner, private equity firm White Cloud Capital, reported a profit of $34.7m in 2016. White Cloud also owns a Britain-based chain of fertility clinics and an online funeral booking service.

Also according to The Australian (Ben Butler, 27 May 2017):

“Directors of … Careers Australia … sent $40 million to the company’s private equity owners in 2015-16…. This was on top of $20.5m in dividends paid to private equity group White Cloud the previous year, and close to $600,000 in “fees” charged by the group, which operates from Mauritius, Luxembourg, London and Singapore. The money appears to have been paid via Careers Australia’s direct owner, Cirrus Business Investments, registered in Caribbean tax haven the British Virgin Islands.”