Under the federal VET FEE-HELP scheme, private vocational colleges gained virtually unregulated access to government subsidies for every student enrolled, usually tens of thousands of dollars per student. Fuelled by salesmen who lured students with free laptops to sign up to over-priced, often online courses, providers made away with billions of dollars of government money while delivering very little education. Murphy was just one of many victims. She has a $7500 debt to the Commonwealth for a course she did not complete. At the age of 20, she has become so disheartened by the experience that she has moved overseas and is not sure if she will ever return to study. “I was in so much shock when it all happened because I was really enjoying my course,” Murphy said last week from Scotland, where she works in a restaurant as she reassesses her future. “Now I just feel super-disappointed because I could be doing so much more with my life.”

Fifteen months after the Turnbull government finally scrapped the VET FEE-HELP scheme and replaced it with a stricter model known as VET Student Loans, a Fairfax Media investigation has found the enduring impact of the fiasco is worse than expected. It has cost taxpayers more than $7.5 billion, according to government figures, including billions of dollars in rorted loans and bad debt that the federal Education Department concedes will never be recouped. But despite the rampant wrongdoing, nobody has been charged with a criminal offence. Four high-profile training colleges are still being pursued in court by the Australian Competition and Consumer Commission for allegedly making false and misleading statements: Unique International College; Empower Institute; the Australian Institute of Professional Education; and Phoenix Institute. Between them, they collected $458 million in Commonwealth subsidies for diplomas issued at the height of the rort. Another three colleges have settled their cases with the ACCC.

And then there is the human toll: the students who were conned into taking out a loan or did so in good faith, or those who had no idea they had been saddled with debt by a dodgy provider. Some of them may not even know they owe up to $100,000. Others, like Murphy, are still trying to get their loans waived. They are stuck in a complex maze of federal departments and agencies. “There seems to be a lot of people shuffling around papers, ticking boxes and asking for more paperwork,” says Murphy's mother, Valerie Lester, a Melbourne-based TAFE teacher. “We’re drowning in bureaucracy.”

Valerie Lester, mother of Rachel Murphy, is a TAFE teacher. Credit:Josh Robenstone Losing trust An analysis of figures from the Student Loans Ombudsman shows that the federal watchdog received 4153 complaints relating to VET loan assistance between July and December last year, the first six months of its operation, and "it is likely there will be future peaks". In the final three months of the year, 566 of those complaints involved people discovering a debt only after they had earned $55,874 – the threshold at which students must begin repaying their loans to the government. But insiders believe this is just the tip of the iceberg. Fairfax Media can reveal that in 2016, the Education Department wrote to 524,477 VET FEE-HELP loan students inviting them to continue their studies under the new loans system in 2017. Only 75,248 responded.

Of the 449,229 students who did not respond, little is known. Did they ever intend to complete their course? Did they even know they had been enrolled in one? The department received about 1600 complaints from students in the six months to June last year but recently told the Senate, “it is difficult to report accurately the precise number of students who did not know they were enrolled or had a debt'' Australian Education Union federal TAFE secretary Pat Forward says governments now have a responsibility to mop up the mess: to waive all loans taken out illegitimately, and to look after students who signed up to substandard courses. “It has taken away young people’s trust in the system – people now feel there is no way of knowing whether the course that they’re enrolling in is worth anything, or whether the provider is going to deliver what they claim,” Forward says. “So the impact of VET FEE-HELP extends well beyond just the students who were caught up in it; it extends to a whole generation of students who now wonder: why should I bother doing vocational education and training?” Tax office involvement

It’s hardly what the Gillard Labor government set out to achieve when it expanded the income contingent loan scheme in 2012. Modelled on successful university HECS loans, VET FEE-HELP was meant to deliver a wide variety of affordable diplomas and advanced diplomas in areas with skill shortages. But history shows the lack of safeguards made it too easy for shonky operators to rort the system. The Australian Competition and Consumer Commission has investigated 15 colleges since 2012, obtaining settlements with three so far. Careers Australia was forced to pay back $44 million; the Australian Vocational Learning Centre repaid $225,940; and Acquire Learning was fined $4.5 million. But while administrative sloppiness by the Education Department is well known, less so is that the Australian Taxation Office was also embroiled in the scheme, thanks to a loophole allowing dodgy colleges to legally obtain the tax file numbers of prospective students. Sources have told Fairfax Media that it was “reasonably common knowledge in the industry” that as long as providers could supply the name and date of birth of a student, the ATO would rectify incomplete or missing tax file numbers – which were needed in order to secure an enrolment.

Loading Asked what measures were taken to assess the veracity of each request, an ATO spokesman said tax file numbers would only be confirmed if the provider had made “genuine attempts to contact the student, but were unsuccessful” and if the details given by the authorised contact officer matched what was on the agency’s database. But the federal Auditor-General has confirmed that no document was required proving that the individual in question had agreed to having a VET FEE-HELP debt. The department didn’t close the loophole until September 2016 – a year after media reports alerted the government to the scale of the problem – and only after people got in touch with its compliance unit insisting they had never provided a tax file number or had been scammed. By that stage, the ATO had responded to thousands of requests for tax file numbers from colleges and salesmen, some requests listing up to 200 students. “How VET FEE-HELP didn’t lead to a royal commission, I don’t know,” says former Holmesglen TAFE boss and industry expert Bruce Mackenzie. “It was a disaster.”

'Burned by the system' Oskar Beggs-Steventon was another casualty. Drawn by the flexibility of being able to study online, in 2015 the 30-year-old signed up to an online community services diploma with the private Evocca College. He found himself floundering within six months, with no guidance from teachers and the distinct impression that the institute didn’t necessarily care if he passed or failed as long as the money kept flowing. Evocca lost its accreditation last year after racking up $440 million in Commonwealth subsidies over three years.

Almost three years later, Beggs-Steventon says he feels “so burnt by the system” he’s not sure if he’ll ever return to complete a qualification. Oskar Beggs-Steventon, who has a VET FEE-HELP debt of about $20,000 for a course he says was substandard and which he didn't complete. Credit:Jason South “There was no support,” he recalls. “You’d be asking questions about what on earth you were meant to be doing and not getting responses for weeks. Then all of a sudden you’d have a new teacher. It made me so despondent, because I was struggling to complete units with so little input. “That’s the sad thing about it: you’re trying to put your best foot forward and then you find yourself $20,000 behind in debt for something that was so substandard.” Government data shows that 617,535 VET FEE-HELP loans were issued between 2009 and 2016. But about $1.2 billion in loans were “inappropriately issued” by shonky providers between 2014 and 2015 alone, and won’t ever be recovered.

A further $1 billion worth of loans will never be recouped from new debts raised in 2015-16 because the students who took them out are not expected to ever earn the repayment threshold. However, these are just snapshots based on the most recently available figures from the Commonwealth’s actuary. Some believe we’ll never know the full cost to taxpayers. To stem the bleeding, the Coalition scrapped VET FEE-HELP and introduced a tighter system that began on January 1 last year. VET Student Loans has tougher entry requirements for providers, and courses are capped to limits of $5000, $10,000 and $15,000, depending on the cost of delivering them. Hundreds of qualifications unsuited to industry needs have also been wiped from the list – such as sound and vibration therapy, circus arts, and butler services – and the VET Student Loans Ombudsman oversees complaints. "The sytem that is now in place is much more robust and provides a lot more protections for students," says VET Assistant Minister Karen Andrews.

Her Labor counterpart, Doug Cameron, isn't convinced, which is why the opposition has plans for a "thorough review" of post-school education and training if Bill Shorten wins office. Others believe the pendulum has now swung too far. Andrew Norton, higher education director at think tank the Grattan Institute, says the list of providers is so restricted that some students will end up picking courses based on favourable funding arrangements rather than their ideal course, while the loan caps are so low that students will end up routinely paying for their courses upfront, and borrowing money from banks and other sources. Consumer Action Law Centre chief executive Gerard Brody is somewhat more optimistic, but says a remediation program is needed to look back at everyone with a debt to their name to determine if the loan was “fair”. When it’s not, the government should force the provider to wipe it, or wear the loss if the provider no longer exists, he says. Across town, in the eastern suburb of Blackburn, Rachel Murphy’s mother, Valerie Lester, couldn’t agree more.

“It was a shocking rort, and the fact that successive governments allowed this to continue is despicable and disgusting,” she says. “Now I just want Rachel’s debt waived. Enough is enough.”