4.2.1 Expand Loan assistance for VET learners

4.2.1 Expand Loan assistance for VET learners

Victoria’s Free TAFE initiative makes it easier for more Victorians to access training to get the skills they need. Free TAFE supplements other government initiatives, including Skills First, VET Delivered to School Students and school-based apprenticeships and traineeships.

Free TAFE covers the cost of tuition fees for many courses, helping many Victorians who may not have the financial capacity to pay for their studies. Since 2019, over 170,500 Victorians accessed Free TAFE, saving them $460 million in tuition fees.

Following Victoria’s success with Free TAFE, the Commonwealth Government funded $107 million of fee-free TAFE, giving 62,800 more Victorians access to training in areas of need.⁴¹ It also announced 5,200 fee-free TAFE places in construction and housing, available to Victorians from January 2025.⁴²

Disparities in Commonwealth Government funding between VET and higher education have a negative impact on learners

For learners who cannot access VET through Free TAFE or Skills First, loan assistance from the Commonwealth Government is another option.

While most higher education students can access the Higher Education Contribution Scheme and Higher Education Loan Program (HECS-HELP),⁴³ VET learners who cannot access Victorian Government support must pay their tuition fees up front or incur a 20 per cent loan application fee if they undertake a Commonwealth Government funded VET Student Loan.⁴⁴ VET Student Loans are also subject to loan caps, with some only covering around $6,000.⁴⁵

Funding disparities may lead to learners not choosing the training pathway that suits them best, with VET pathways at a disadvantage.⁴⁶ Research shows that VET diplomas and advanced diplomas are substitutes for higher education graduate diplomas and Bachelor degrees in the labour market.⁴⁷ However, more Commonwealth loan assistance is available for higher education qualifications than for diplomas, distorting student choice.⁴⁸

Expanding the Commonwealth Government’s VET Student Loans will be beneficial

Greater Commonwealth Government investment in the VET Student Loans scheme can help meet its commitment to lifting tertiary attainment to better meet industry needs. A loan scheme is an attractive option for expansion at this scale, as students repay their loans when they start earning above the income threshold.

The Commonwealth Government is making it easier to repay these loans by cutting 20 per cent of all existing student loans by June 2025.⁴⁹

An extended Commonwealth Government’s VET Student Loans scheme could cover more Diplomas and Advanced Diplomas and certain Certificate III and IV level courses with high-quality learning experiences and strong employment outcomes. The loan caps could be increased to cover the full cost of a course with consideration given to students’ capacity to repay.

Funding must be accompanied by suitable oversight

The VET Student Loan scheme currently extends to fewer than 100 VET courses. An expansion of the scheme should be accompanied by suitable national oversight of the VET system, to make sure any expansion of the scheme strengthens the VET system and leaves learners better off.