November 26, 2017

The rise and fall of Careers Australia

By Rosie Scroggie

Over the past year, there have been numerous reports of private for-profit providers closing their doors or entering into administration. While Federal Government reforms, and the stripping of federal funding from some providers has felled some giants in the sector, the new income contingent loan scheme, VET Student Loans, and the government’s increased regulation and compliance regime do not go far enough to protect the reputation of the sector, or ensure quality education for students.

One of the most high profile private for-profit providers to collapse since the introduction of VET Student Loans, is Careers Australia.

Careers Australia opened its doors in 2006, and became one of the largest private for-profit providers in the country. At its peak it had 15 campuses around Australia, and a workforce of 1208 employees. An indicator of the “sales” focus of the college is that nearly half of its workforce at its peak was based in the Philippines.

The first hint of future trouble for Careers Australia was reported in the media in February 2016. As the Federal Government put together its reform strategy for VET FEE-HELP, The Australian reported that Careers Australia admitted in reports filed with ASIC that it relied on public funding for a staggering 85 per cent of its revenue. The same report noted that the continuation of government funding was “critical” for Careers Australia to stay in business, but noted that contracts were “ongoing” and “unlikely to be discontinued in the foreseeable future.” Careers Australia made a $34.7 million profit after tax in 2014-2015.

When this report was submitted to ASIC it did seem like the gravy train of VET FEE-HELP was unstoppable, but between 2014 and 2016, scandal after scandal in the private for-profit VET sector would finally force the government into “reforming” VET FEE-HELP. Some of these scandals were attributed to Careers Australia. In May 2016, the ACCC announced the outcomes of its court proceedings against Careers Australia.

Careers Australia was found to have “made false or misleading representations and engaged in unconscionable conduct, in breach of the Australian Consumer Law.” This included misrepresenting that courses were free, or would lead to employment as well as offering inducements such as iPads and laptops. Proceedings also uncovered Careers Australia targeted vulnerable and disadvantaged communities including remote Aboriginal communities in Queensland.

Careers Australia undertook to inform students that there was the potential of having their enrolment and debt cancelled; to implement a compliance program and to not engage in the “conduct of concern” in the future. Throughout the ACCC investigation, Careers Australia cancelled at least 12,130 student enrolments and repaid or partially repaid the Commonwealth “amounts totalling at least $44.3 million.”

Only two months later, in July 2016, more allegations came to light in the media of Careers Australia cold calling potential students who had signed up on a job website. At this stage, cold calling had been banned by the Federal Government. Careers Australia alleged that it wasn’t cold calling as people who signed up to Jobify had allowed their details to be passed onto Careers Australia, however a former employee said he doubted most potential students gave informed consent for their details to be passed on, and that excessive pressure was placed onto potential students to sign up for often unsuitable courses. One 18 year old told the media he was pressured into signing up for $17,000 online course in leadership despite not having finished high school and actively looking for outdoors work.

Careers Australia was now under intense media scrutiny with several outlets consistently raising concerns about their sales tactics and “leads generation”. By August 2016, ASQA was investigating.

It is also worth noting that during this time period, Careers Australia was making strategic political donations. In 2014-15 they donated $43,400 to various Liberal party branches, and $13,750 to various Labor party branches. In 2015-16 their donations to the Liberal party had decreased to $27,900 and their donations to Labor party branches had more than doubled to $41,650.

In April this year, it was reported that federal funding for Careers Australia had been stripped, and that they had been informed that they would lose accreditation under the federal government’s new VET Student Loans scheme. Only weeks later in late May, Careers Australia had moved into voluntary administration leaving staff and students in limbo. Many staff and students were informed via a brief text message. Up to 1,000 staff members were stood down immediately without pay, and classes were cancelled for around 15,000 students at 14 campuses. Some students were just days, weeks or months away from completing their qualifications.

Careers Australia has not died quietly. After moving into voluntary administration, the media has reported that the company may have been insolvent as early as December 2016, which would put Directors at risk of legal action. It was also reported that 6 weeks before going into administration, Careers Australia wrote to the Federal Education Minister asking for immediate access to funding to prevent its collapse.

The collapse of a giant like Careers Australia demonstrates just how dangerous for-profit providers in the education sector can be. Over the period of 2013-2015 Careers Australia received $264,359,551 in government funding. In the same period, only 14.7% of their students graduated. This immense amount of government funding did not go into building up an educational institution, or providing services to students. It went to a complex marketing strategy, and as profits into the pockets of individuals. While tuition assurance schemes should ensure students can complete their courses at other providers, many students have complained in online forums about the difficulties of getting clear information about what to do. They also say they have been told by other providers that not all completed units would be credited. Careers Australia students have been left with debts for uncompleted diplomas of untested quality; while shareholders were paid out $40 million in dividends less than 18 months before it went bust

In 2015 the Workplace Research Centre produced a report for the AEU, The capture of public wealth by the for-profit VET sector. The report warned of “sustained profitability and poor quality educational outcomes in the for-profit sector (even with regulatory changes,) and few of the public benefits that theoretically accrue from a competitive market.” The report put forward several recommendations which would restore confidence in the whole VET sector, and ensure a future for TAFE. These recommendations included minimum hours of delivery for courses, capping funding to private RTOs at 30% of government vocational education funding to ensure TAFEs remain able to provide quality education, ban the subcontracting of delivery, better regulation of RTOs and an end to governments manipulating subsidies for private RTOs.

While the Federal Government’s reforms to the sector may have assisted in ending the reign of training giants like Careers Australia by stripping them of federal funding, it is clear that the new income contingent loan scheme, VET Student Loans, and associated increased regulation does not go far enough, and will neither rort-proof the sector, nor improve quality.

Setting caps on the amount of money students can borrow, in the absence of genuine delivery, will not stop rorting – it will simply restrict how much profit can be made; setting completion rates will encourage an even laxer approach to quality in an environment where enforcement appears to have become almost non-existent for private for profit providers; and linking the courses which are eligible for loans to areas of industry need to alleged skills shortages is a largely discredited process. The “science” behind it is imprecise, and at best, it leaves students and the sector playing catch up, with course offerings lagging behind real-time demand. It also encourages a “just in time” approach to vocational education.

When we look at the rise and fall of private for-profit providers like Careers Australia it is clear to see their only motive was profit. While the Federal Government’s latest round of “reforms” may have felled Careers Australia, the other lesson we have learnt from private for-profit providers over the past decade is that where there is public money available, someone, somewhere will find a way to turn that money into profit regardless of caps, regulations and completion rates. It isn’t good enough for reforms to bring down individual providers. We need a sector where the primary purpose of a provider’s existence is education, not profit.

The real purpose of opening access to government funding to for-profit private providers through income contingent loans - facilitating a transfer of funding the vocational education sector from governments onto individual students – has been achieved, and the new VET Student Loans scheme will continue this process.

Rosie Scroggie is an Administrative Officer at the Australian Education Union Federal Office