It was once said that there is “no such thing as a free lunch” and I am afraid in some cases VET Fee Help might appear to be free, but it can come at a significant cost.
Understanding Vet Fee Help
- VET FEE-HELP is a student loan scheme for the Vocational Education and Training (VET) sector that is part of the Higher Education Loan Program (HELP).
- VET FEE-HELP assist eligible students undertaking certain VET courses of study at diploma, advanced diploma, graduate certificate and graduate diploma level.
- A VET provider is a Registered Training Organisation who has been approved by the Australian Government to offer VET FEE-HELP assistance to their students.
The course fee is paid by the government per competency unit, at no initial cost to you.
You begin to pay the VET Fee Help debt after you have completed the course and when your salary exceeds the minimum threshold. At this point 4% of your salary is automatically deducted to repay the loan. The repayments are a sliding scale so that if or when you earn over $95,000 the repayments are increased to 8%.
Repayments are made through the Australian taxation system and are called compulsory repayments and continue until the whole debt has been repaid.
There is no interest charged on HELP debts, however the debt will be indexed on 1 June each year to maintain its real value and to reflect changes in the Consumer Price Index (CPI). This means that the debt owed by you will increase per year according to the CPI.
For example, if the CPI goes up 2% then the debt will also rise by 2%. If you owe $10,000 in 2014 and when the CPI for that year’s calculated at 2% then the debt becomes $10,200 and so on until the debt is paid.
In addition to the course fee there is a 20% loan fee that is applied to VET FEE-HELP loans. The loan fee is 20% of the VET FEE-HELP loan incurred for each unit. The loan fee does not count towards the FEE-HELP limit, just the VET FEE-HELP debt.
Undertaking a unit, which costs $1,000.00, for example:
The loan fee is 20% of $1,000 = $200. The actual VET FEE-HELP debt for that unit will be ($1,000) + the loan fee ($200) = $1,200. It is important that you question the RTO on whether the loan fee is included in their course fee or not. If it is not, then you can expect to pay an additional 20% of the course fee, which will be added to your debt.
There are no loan fees to pay if VET Fee Help is not used. This means your course fee drops by 20% per unit.
Your student loan is indexed to the annual CPI. This means that the debt will increase every year at a percentage commensurate with the rise in the consumer price index. It does not remain stagnant. It is important to realize that at some stage your course fee will be required to be paid back. This is not a FREE course as some organisations state.
Only those students enrolled in Diploma or higher courses are eligible for VET Fee Help which in turn leads to many graduates entering relatively low paid industries with large debts. The VET Fee Help loan is a significant debt that will take some years to pay off. The longer the time frame the greater the debt you incur.
Always shop around with RTOs and ask for the total cost of the course. Make sure everything is inclusive and that there are no hidden costs.
Please note: In some cases RTOs that offer VET Fee Help will double or sometimes triple the fee for the same course in comparison to other RTOs that do not offer VET Fee Help, for no apparent reason. If this is the case you should ask for an explanation as to why they have done this.
Invariably the VET Fee Help courses are more expensive.
There are many RTOs that offer excellent payment plans that can be customised to the student’s ability to repay and at no interest. You have the right to ask for this.
Still not convinced? ABC News and A Current Affair has also canvassed VET Fee help abuses and the targeting of disadvantaged Australians. Check out our case studies and your local news to catch up on the most current reporting and outcomes.
Before signing up for Vet Fee Help check out the following three case studies:
Scenario 1 (With VET Fee Help)
You enroll with an RTO that offers VET Fee Help for the Diploma of Business. The course cost is $10,000. If we assume that the 20% loan fee is not included in the course fee you add an additional 20% to the course fee is now = $12,000.
If you pay nothing up front and complete the course you will then pay 4% of your annual salary back at $2,052.06 per year* ($172.00 per month) until the debt is paid off (you will pay more per month if your salary goes up). If you remain at the same salary level and the CPI did not increase over this time they you will eventually pay back your debt in approximately 5 years. If your salary increases so does the percentage of the new salary (up to 8%) to be paid off the repayments and the debt could be paid off in a shorter time period.
However, it is unlikely the CPI will remain 0% over this time. For example, if the CPI was increasing at 2% per annum the cost of the loan would increase between $100-$200 per year depending on the student’s salary and CPI increases.
So you are likely to end up paying $13,000.00 over 5 years.
Remember: The course fee is a debt and will be required to be paid back.
*assuming you earn over $51,309.00
Scenario 2 (Without VET Fee Help)
You enrol with an RTO without VET Fee Help for the Diploma of Business and are not employed in the area. The course fee typically costs less at: $3,000 (for the same course!). You select a 12 months payment plan that is FREE of any interest or CPI increases (check for this). You will then pay $250.00 per month and have the course paid off in one year at a savings of approximately $10,000!, compared to scenario 1.
So you are likely to end up paying $3,000.00 over 1 year.
Note: You are now debt free.
Scenario 3 (scenario 2 and employed in the relevant area)
If you are employed in a specific area and enroll in a course that is work related and relevant to your current employment then you are entitled to claim a tax deduction for self-education work expenses.
The entry level into most careers is a Certificate II, Certificate III or Certificate IV depending on the requirements of the industry; none of these courses attract VET Fee Help.
Many industries do not require a prospective employee to initially have a Diploma qualification.
The Diploma is generally an advanced course with significant content and assessments that attract higher course fees. Before enrolling in a Diploma course you should research the industry that you are hoping to work in and find out what the minimum academic requirement is to gain employment.
If you are already employed in an industry (assuming you have already completed a lesser qualification) and decided to enroll in a Diploma program that is relevant to your current employment, the expenses related to that course would attract a significant tax deduction.
Expenses that can be claimed include: course fees, home office running costs, stationery, equipment repairs, phone calls, postage, textbooks, travel to and from the place of study, computer consumables, fares, internet usage and purchases of equipment up to $300.
Please note: If you are employed in a relevant industry and enroll in a VET Fee Help Diploma or Advanced Diploma program you are NOT permitted to claim the repayments of your VET Fee Help debt as a tax deduction.
So what is your best option?
We suggest ““ a combination of Scenario 2 & 3
The best option would appear to be the completion of an entry level Certificate II or III or IV in your area of desired employment. Once employed you would then enroll in a Diploma course that is relevant to your area of employment and claim your self-education expenses as a legitimate tax deduction.
This option gives you the knowledge and confidence to undertake a more advanced course in an industry that you enjoy and intend to progress in. importantly you are DEBT FREE!, and you are able to benefit from a significant tax deduction that can be legitimately claimed against your accrued expenses.