10,000 VET students hit with historical debts

More than 10,000 students have been hit unexpectedly with historical VET debts after an IT glitch meant the loans were held up in internal government systems for as long as five years.

The Australian Tax Office is now seeking to claw back $24.2 million in debts, which the federal government maintains are genuine income-contingent loans that students agreed to and were expected to pay, but the system error meant they were not notified of the debt at the appropriate time.

In total, about 10,252 students have been affected by the system failure, with two-thirds of them owing loans under $2000. A smaller number – about 3.2 per cent – have debts totalling more than $10,000.

Skills Minister Brendan O’Connor has instructed his department to investigate why historical VET loans dating back to 2017 had suddenly been transferred to students’ ATO accounts.Credit:James Brickwood

Skills Minister Brendan O’Connor said he had instructed his department to conduct an initial investigation and “every reasonable attempt” had been made to individually notify and offer assistance to students.

“I have been made aware that a number of historical student loans have unexpectedly been applied to students’ ATO profiles,” he said.

“The previous Coalition government had student loans – around 90 per cent of which should have been issued in 2017 – held up in its systems for several years after the relevant study was undertaken and we are still discovering and fixing instances of carelessness and incompetence.

“I have directed the department to further investigate the causes of this issue, with a focus on preventing all unfair impacts to current and former students.”

The Department of Education and Workplace Relations was first alerted to the problem on August 9 when students began raising concerns about their loan amounts and has since published information on its website about the issue. The problem was identified following an IT update that caused invoices that were stuck in the Commonwealth student payment system to be transferred to the students’ ATO accounts.

Deputy Opposition Leader Sussan Ley, the spokeswoman for skills and training, said O’Connor had not been sufficiently transparent with the public about what had occurred until questions were asked.

“Quietly approving his department to claw back tens of millions of dollars without fronting up and explaining what is going on is hypocrisy writ large from a Labor government that preached transparency before the election,” she said.

“One of the first things Anthony Albanese did as prime minister was rip skills policy out of the Education Department and put it into the industrial relations portfolio – and clearly it’s not working.”

Under the VET loan system, former students start repaying their debts once they earn above the income threshold, which is set at $47,014 for the most recent tax year. The debts are indexed to the consumer price index, which rose to 3.9 per cent this year. The minister said he had been advised that indexation was not applied to the majority of the affected loans.

The department has acknowledged that some debts might have been incurred through a dodgy provider under the Gillard government’s VET-FEE-HELP fiasco and might be eligible for redress measures.

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