THE federal government says it is willing to consider a wide-scale audit of training providers to weed out rorting of the $1.6 billion VET FEE-HELP loans scheme with inflated course fees.

It comes as evidence emerges of massive pricing discrepancies between fee-for-service and VET FEE-HELP courses being offered by a number of registered training organisations (RTOs), with taxpayers forking out up to 400 per cent premiums to line the pockets of training companies with government loans, many of which will never be repaid.

The deregulation of the VET FEE-HELP scheme has led to a massive increase in for-profit, private education providers and an industry-wide decline in quality.

According to the Education Department, just over one quarter (26 per cent) of students who enrolled in VET FEE-HELP courses in 2011 finished within three years. Completion rates for online diplomas were abysmal, with just seven per cent of students completing their course.

The government bill for VET FEE-HELP loans blew out by $315 million last year to $1.615 billion, representing 189,000 students at 254 training providers.

Modelling by the Grattan Institute estimates 40 per cent of those loans will never be repaid as those students’ income will never rise above the repayment threshold of $53,000, meaning taxpayers will wear that cost.

According to a University of Sydney study, some of Australia’s largest RTOs are raking in profit margins of more than 50 per cent off of these loans.

Under the deregulated system, private training colleges are free to set their own fees. In effect, they have been handed a blank cheque from the Australian taxpayer.

In a perversion of a ‘pay what you want’ honour system, it’s become ‘charge whatever we can get away with’, critics argue. All the RTOs have to do is get students to sign up and keep them hanging around until the first census date, and the bulk of money goes straight into their pockets.

Under the Higher Education Support Act 2003, the government does not regulate tuition fees, but under the law a VET provider cannot charge different amounts for the same course based on whether the student pays upfront or through the VET FEE-HELP system.

However, a news.com.au investigation has uncovered examples of RTOs apparently circumventing this restriction by operating under separate business names.

Two Cairns-based RTOs are both owned by the same man and operate out of the same business address. One, which is approved for VET FEE-HELP, charges $12,750 for a Diploma of Management. The other, which sells courses direct to students, charges just $3420 for the same diploma, for which much of the course material appears to be identical. A number of other diplomas are offered at different rates.

Asked to explain the pricing discrepancy, the owner told news.com.au the “journey of study and learning” was “quite different” for students of the two RTOs.

“They are two separate Registered Training Organisations (RTOs). Some qualifications are offered by both, and descriptions will be similar as like most RTOs reference is made to the Training Packages for this information,” he said. “The journey of study and learning is quite different for students from each of these RTOs.”

He added that each RTO had a different learning management system and curriculum. “Students studying under the VET FEE-HELP loan scheme receive a more comprehensive and frequent support, mentoring and training service which are not available to the other students,” he said.

“These services are available to students upon access to the course they are enrolled into. It is also supported by a strong administration team, due to VET FEE-HELP procedures.”

In Sydney, a similar discrepancy exists between courses offered by two separate training providers owned by the same company, trading under the same RTO registration number.

One provider offers a Diploma of Business for an upfront fee of $7000. The other charges $14,800 for its Diploma of Business — delivered online — under the VET FEE-HELP scheme.

The company did not respond to requests for comment.

One industry insider, who did not wish to be named, said many RTO owners were “laughing in the government’s face”. “Back in 2013, these RTOs were all just starting to apply for the VET FEE-HELP program,” he said.

“I was talking to these directors, and they were all saying to me, ‘We’re going to be doing these VET FEE-HELP courses and we’re increasing our prices.’ I was thinking it’s just bloody unethical. This is just a blatant rip-off of the taxpayer and the government.

“The taxpayers have a right to know how much money has been wasted on this program and how much money has been paid to these RTOs and their brokers.”

While the industry regulator, the Australian Skills Quality Authority, has been given new powers to issue fines for a number of infringements, it does not have the power to regulate the fundamental issue of pricing.

Assistant Education and Training Minister Simon Birmingham, who has led the government’s efforts to reform the sector, described such examples of pricing discrepancy as “absolutely concerning”.

“I’ve written to and had communications with the ACCC with concerns about unscrupulous practices, not just in terms of sign-ups but also some pricing activity,” he said.

Rod Camm, chief executive of the peak body the Australian Council for Private Education and Training, which represents around 28 per cent of RTOs and about half of all employees in the sector, described the pricing discrepancies highlighted by news.com.au as “predatory and inappropriate”.

“I would have thought that’s some sort of breach of consumer protection laws,” he said.

media_camera Senator Simon Birmingham has flagged a crackdown on predatory pricing.

media_camera Senator Lee Rhiannon has called for an overhaul of the VET FEE-HELP system.

media_camera Rod Camm, head of peak body ACPET, has also voiced concerns.

Greens Senator Lee Rhiannon said information showing “potential rorting of public funds by private, for-profit education companies is becoming an almost weekly occurrence”.

“The Greens have consistently been calling for an overhaul of the way vocational education and training is funded to put an end to public subsidies being used to line the pockets of private companies,” she said.

“The Greens established a Senate inquiry investigating private education companies, but we would encourage the government to conduct its own, comprehensive audit of the private education market to identify cases of potential rorting and ensure public money is being spent to benefit students, not private companies.”

Senator Birmingham’s first wave of reforms focused on cracking down on unscrupulous marketing tactics employed by RTOs and their agents — including offering inducements such as laptops and iPads to sign up — and encouraging students to “do their research” and weed out the good providers from the bad ones.

“I am well aware of qualms about whether courses are always priced at a level that accords with the quality and content and duration of the training being provided, and certainly we’ve already flagged that the reforms undertaken to date are initial reforms,” Senator Birmingham said.

“There will be a further review around VET FEE-HELP and if that further demonstrates that students and taxpayers are being taken for a ride, then we’ll have to take action.”

Asked whether the government would consider an audit of pricing behaviour, either to identify RTOs operating under separate business names charging different rates, or RTOs which raised their course fees after being approved for VFH, Senator Birmingham said it would be “one type of measure that could be looked at”.

But, in a tacit acknowledgment of a fundamental failing of the deregulated system, he added that determining whether the fees charged by RTOs reflected the true cost of delivery was difficult.

“I’m sure there are different ways you can try to audit the cost estimates of a particular course, but they are difficult and I’m sure they would be hotly contested,” he said.

Mr Camm said part of the problem was that unlike in the tertiary education sector where price competition is fierce, vocational students don’t appear to be price sensitive.

“You don’t see this sort of thing in the higher education sector, where if anything the competition is driving prices down,” he said. “So while it’s a loan and they have to pay it back, price doesn’t seem to be important to them.”

He called for greater requirements to be placed on providers to test the viability of their offerings and on the capacity of the student to repay.

“That’s a design issue within the system,” he said. “If you go to the MySkills website, for example, there are plenty of courses that show the projected income is lower than the repayment threshold.”

The regulator is currently investigating 23 private colleges — including six from Queensland, seven from NSW and six from Victoria — over allegations of unscrupulous sign-up activity. Businesses found to be in breach of fair trading laws face fines of up to $1.1 million and a cancellation of their registration.

An ASQA spokesman said the investigations were “underway and ongoing”. News.com.au understands an outcome is expected in coming weeks.

frank.chung@news.com.au

Originally published as The $1.6bn rort on taxpayers