On 10 December 2018, the Federal Parliament enacted the Higher Education Support Amendment (VET FEE-HELP Student Protection) Act 2018 (Cth) (Student Protection Act) to amend Schedule 1A of the Higher Education Support Act 2003 (Cth) (HESA).

The VET FEE-HELP scheme operated from 2009 to 2016 and provided eligible students with access to loans for approved vocational education and training (VET) diploma level or above courses with income contingent repayment conditions.

These amendments allow the Secretary of the Department of Education (Secretary) to re-credit amounts incurred by students as a result of inappropriate conduct by VET providers or agents including conduct which occurred prior to 1 January 2016 (extending the time period from that under the current legislation). VET Providers should note that in certain circumstances, the reforms also allow the Commonwealth to recover the amount of the debt remitted from the VET provider.

Key amendments

The amendments to Schedule 1A of the HESA introduced by the Student Protection Act:

• grant a discretionary power to the Secretary to re-credit a person's FEE-HELP balance where inappropriate conduct by VET providers or agents caused VET FEE-HELP debts to be incurred at any time before the closure of the scheme on 1 January 2017;
• provide that the Secretary, in deciding whether to re-credit a person's FEE-HELP balance, must be satisfied that:
  • the unit of study was not completed (or it would be unfair or inappropriate to treat the person as having completed the unit of study); and
  • it is reasonably likely that inappropriate conduct occurred.
• provide that in determining whether inappropriate conduct occurred, the Secretary is to have regard to any matters prescribed in the VET Guidelines;
• grant the Commonwealth the power to recover from the VET provider the amount of the VET FEE-HELP debt remitted. This applies if the VET provider treated the student as being entitled to assistance under clause 43 of Schedule 1A to the HESA where the student was not so entitled;
• allow students and VET providers to make submissions in certain circumstances as to whether the Secretary should re-credit the FEE-HELP balance;
• allow the Secretary to exercise the discretion to re-credit a person's FEE-HELP balance on application by a student or on his/her own initiative. The Secretary's ability to exercise the discretion on his/her own initiative is designed to allow for the FEE-HELP balances of multiple students to be re-credited as a group without students being required to submit applications; and
• amend the Ombudsman Act 1976 (Cth) to allow the VET Student Loan Ombudsman to make recommendations to the Secretary regarding re-crediting.

The amendments commenced on 1 January 2019.

It is not yet clear what constitutes 'inappropriate conduct' by a VET provider or agent for the purposes of the amendments, as the current VET Guidelines do not provide a definition. We expect that the VET Guidelines will be amended directly to address this issue this year.

However, the Explanatory Memorandum notes that the criteria for inappropriate conduct are intended to encapsulate, by reference, and go beyond the scope of the existing unacceptable conduct criteria for re-crediting a student's FEE-HELP balance. The conduct is likely to include conduct already captured under existing legislative provisions which includes, among other things:

• advertising that VET FEE-HELP assistance is not a loan or that a unit or course was free;
• inappropriate marketing including offering inducements to students to enrol in courses;
• unconscionable conduct (whether or not a particular individual is identified as having been disadvantaged by the conduct);
• misleading or deceptive conduct; or
• use of physical force, or harassment or coercion, in connection with the application or enrolment in the course.

Practical significance

These amendments follow the first year of operation of the VET Student Loans Ombudsman established in July 2017. From 1 July 2017 to 30 June 2018, the Ombudsman received 6,397 complaints from students disputing debts or concerning issues with their VET provider. The Ombudsman's Annual Report remarked that the VET FEE-HELP scheme had 'left a long tail of individuals who have incurred debt for which some form of redress would appear to be desirable.' Evidently, this legislation is designed to address this.

The amendments broaden the remedies available to persons affected by the misapplication of the VET FEE-HELP scheme. They operate beside the existing provisions of the HESA concerning re-crediting VET FEE-HELP debts where unacceptable conduct has occurred by VET providers and agents.

Given the retrospective application of the Student Protection Act, we expect that there will be an increase in the amounts of re-credits being processed as many more students will be eligible for re-credits under the broadened regime.

While the Commonwealth has the power to recover VET FEE-HELP payments made to VET providers, this is in more limited circumstances than under the current provisions of the HESA. It remains to be seen whether the Secretary in deciding to re-credit FEE-HELP balances will seek repayment from VET providers. However, where the Commonwealth does seek to invoke its right to repayment, VET providers have the opportunity to make written submissions as to why that decision should not be made.

At this stage, the amendments only allow the Secretary to re-credit FEE-HELP balances until 31 December 2020 as the Government intends that all student complaints be resolved by then. This timeframe may be amended by the VET Guidelines.

Our team can assist you to devise a strategy for responding to invitations from the VET Student Loans Ombudsman and the Commonwealth Department of Education to make submissions on proposed re-credits of students’ VET FEE-HELP loans. It is critical to have a coherent strategy to minimise the number of enrolments you investigate and make submissions on, whilst also ensuring that you properly manage the risk of being required to repay to the Commonwealth VET FEE-HELP amounts.