Alison Branley reported this story on Friday, April 29, 2016 12:38:00

KIM LANDERS: The Federal Government has conceded that a student loan scheme that handed out more than $5 billion was a failure.



Federal Vocational Education Minister Scott Ryan has now released a discussion paper on how to re-design the VET FEE-HELP student loan program.



The scheme has been plagued by rorting, with tens of thousands of vulnerable students signed up to courses they were unlikely to complete and debts they couldn't afford.



A government crackdown last year led to multiple colleges going out of business and students left without training.



Reporter Alison Branley spoke with Vocational Education Minister, Scott Ryan.



SCOTT RYAN: Some of the proposals refer to whether or not there should be limits on fees, limits on Commonwealth subsidies through the loans, because one of the biggest problems of this scheme is the uncapped nature of it under Labor's institution of the scheme in 2012 that have seen substantial cost inflation both for students and for taxpayers.



ALISON BRANLEY: One of the suggested proposals is for an education ombudsman. What's you view of that?



SCOTT RYAN: There are issues around having a sector-wide ombudsman across the vocational training sector. That would require the agreement of the states.



A number of the states have put in place similar types of provisions. I'm considering that, but I'm also considering whether there should be an ombudsman just to deal with the legacy of cases as a result of Labor's scheme, particularly students that have been taken advantage of, to deal with VET FEE-HELP.



ALISON BRANLEY: And I notice in the paper you talk about students who, from 2016, are the victim of unscrupulous training colleges will be able to apply to the department to have their debts cancelled. What happens to these tens of thousands of students who've been exploited to date?



SCOTT RYAN: That is the greatest scandal of this, how disadvantaged students in particular have been taken advantage of. What we've got now is a legacy caseload and we are dealing with those in a number of ways.



But the law was put in place last year that, as you mentioned, applies from 2016 onwards - we couldn't make that retrospective.



ALISON BRANLEY: Are you though willing to help those students who have been exploited and cancel their debt?



SCOTT RYAN: This government, through both of my predecessors, have taken pretty significant actions that have actually substantially cleaned up some of those particular egregious practices that were taking advantage of students, but we do have to deal with the legacy caseload under the laws that Labor set up.



ALISON BRANLEY: But that wouldn't stop you cancelling their debts?



SCOTT RYAN: Well, no, I mean we've got to go through a process here to ensure that students and taxpayers are protected and unilateral actions like that aren't possible.



ALISON BRANLEY: And this discussion paper talks about doing things like capping the amount that you loan to students, potentially limiting what subjects or courses you will make loans for.



This whole scheme was about deregulating the sector. Isn't then implying all this regulation admitting that the market has failed in this respect?



SCOTT RYAN: What has failed here is that Labor took a funding model and assumptions about the higher education sector and put it on the vocational training sector when it wasn't appropriate.



The markets for vocational education and higher education as we've seen are significantly different and the provisions that were put in place didn't have the protections that were needed to ensure that students couldn't be taken advantage of.



ALISON BRANLEY: And is this an acknowledgement, this discussion paper, that the VET FEE-HELP scheme has been a failure?



SCOTT RYAN: Well, I think the way it was set up by the previous government, it clearly has failed. We've seen waste of money, we've seen students taken advantage of.



We've seen some of our most disadvantaged students taken advantage of because Labor didn't put in place these protections and they didn't think enough about the incentives they were putting in place for poor behaviour.



ALISON BRANLEY: What assurances can you give people that some of the proposed changes will mean that these kind of cowboy training companies don't emerge again?



SCOTT RYAN: Well, that's a key test and so that's why the options have been put out in this way so that I haven't committed to any particular option because I want to understand what are the effects of having funding models like this.



KIM LANDERS: Vocational Education Minister Scott Ryan speaking to our reporter, Alison Branley.