VET Sector Deregulation: When For-Profit Training Colleges Ran Amok

The Policy That Let Billions Disappear Into Thin Air

If you wanted to design a system specifically engineered for fraud and exploitation, you'd be hard pressed to beat what Australian governments created between 2012 and 2015 in the vocational education and training (VET) sector.

The policy was called the VET FEE-HELP scheme - an income-contingent loan program extended to private Registered Training Organisations (RTOs). On paper, it sounded reasonable: give students at private colleges access to the same kind of deferred tuition loans available to university students. In practice, it became one of the most reckless spending disasters in recent Australian history.

What Actually Happened

Prior to 2012, VET FEE-HELP was a relatively modest program. Then the Gillard Labor government opened it up to all private providers, and the Abbott Coalition government turbo-charged it by removing enrolment caps in 2014. What followed was a feeding frenzy.

The numbers tell the story:

By the time the scheme was finally shut down at the end of 2016, the Commonwealth had issued over $6.8 billion in loans - a significant portion of which is expected to never be repaid. The Australian National Audit Office estimated the expected loss to taxpayers at billions of dollars.

Where did the money go? Into the pockets of a rogues' gallery of private colleges that operated more like door-to-door sales operations than educational institutions. Recruiters - paid on commission - targeted vulnerable Australians: people in public housing, people with disabilities, Indigenous communities, and welfare recipients. They signed students up for diplomas those students often didn't want, didn't know they'd enrolled in, and in many cases were not even qualified to complete.

Colleges collected the government loan money upfront. Students were left with debts of $20,000 or more for qualifications that were sometimes worthless, or that they never finished - or in some cases, never started.

Who Got Hurt

The victims of this policy failure were not abstractions. They were:

• Low-income earners saddled with debts they couldn't understand or repay
• Indigenous Australians specifically targeted by predatory recruiters in remote communities
• People with disabilities or literacy difficulties who were enrolled without meaningful informed consent
• Legitimate TAFE and RTO providers undercut by competitors who competed on kickbacks and free iPads rather than course quality
• Australian taxpayers, who funded billions in loans for qualifications that produced little economic value

A 2016 Senate inquiry heard harrowing evidence of recruiters forging signatures, enrolling homeless people, and signing up individuals who had no idea they were taking on government debt.

Why Did This Happen?

This wasn't an accident - it was a policy choice, and it had ideological roots.

Both major parties were committed, to varying degrees, to market-based reform of the VET sector. The logic went: introduce competition, let private providers enter the market, and quality and efficiency will follow. This thinking was embedded in National Partnership Agreements between the Commonwealth and states, particularly Victoria, which ran its own parallel competitive training market that produced similar disasters.

The for-profit training sector spent heavily on lobbying. Industry associations argued that regulation was red tape, that oversight would stifle innovation, and that the market would sort out bad providers. Governments - of both colours - largely agreed.

What they ignored was a fundamental truth: when government is the payer and vulnerable people are the consumers, markets don't self-correct the way textbooks say they do. Students had no real ability to assess course quality before enrolling. Colleges faced no real consequences for poor outcomes as long as the loans kept flowing. The incentives were perfectly aligned - for exploitation.

The Aftermath: Too Little, Too Late

The Turnbull government finally closed VET FEE-HELP and replaced it with the VET Student Loans program in 2017, which introduced tighter eligibility rules and course approval requirements. The Morrison government later established a Student Loans Ombudsman and allowed some debt relief for victims of predatory practices.

These were improvements. But tens of thousands of Australians still carry debts from qualifications that delivered nothing. The Australian Skills Quality Authority (ASQA) deregistered dozens of dodgy providers - but often only after the damage was done. And TAFE systems around the country, particularly in Victoria and Queensland, are still recovering from years of defunding as private providers hoovered up public money.

What Direct Democracy Would Have Done Differently

Here's the thing: this policy was never popular with ordinary Australians. When stories of recruiters targeting homeless people and forging signatures made the news, public outrage was immediate and bipartisan. No voter would have looked at a commission-based training salesperson cold-calling pensioners and said, "yes, this is what I want my taxes funding."

But under our current system, voters don't get asked. A ministerial decision, supported by industry lobbying and ideological momentum, unleashed billions of dollars into an unregulated market - and by the time parliamentary scrutiny caught up, the damage was done.

Direct democracy changes this equation. When members vote directly on policy settings - on whether to extend loan schemes to unregulated private providers, on whether to remove enrolment caps without oversight mechanisms - the people most likely to be harmed have a seat at the table. Decisions like the VET FEE-HELP expansion don't happen by ministerial decree; they happen (or don't happen) because Australians actually chose them.

The VET disaster is a case study in what happens when governments act without genuine accountability to the people they represent. It doesn't have to work this way.

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