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Australian government urged to try and recover student loans from the dead

<span>Photograph: April Fonti/AAP</span>
Photograph: April Fonti/AAP

The Australian government should try to recover unpaid student loans from people who have died and vocational students should be charged minimum upfront fees to avoid perceptions of “free money” to study, the Productivity Commission has suggested.

The public thinktank made the controversial calls in its annual review of government services, which found Australia’s national training agreement has failed to meet key targets.

The commission called for a shake-up of the $6.4bn of public funding given to vocational education and training, warning of poor value for money and a system plagued by “confusing and ineffective” rates of subsidy.

It suggested the federal government change the rules on debt collection to chase the unpaid loans of deceased students from their estates, treating student loans the same as other debts.

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Such a scheme would “reduce the fiscal cost of [vocational student loans] without inhibiting access to [training] or reducing post-vocational education and training student incomes”, it said.

Exceptions could be made for small estates and extenuating circumstances but “the same changes would need to be applied to higher education loan programs”.

The commission also wants new “modest minimum student fees” to be introduced in a bid to wipe out lower-quality courses. It said there should be a minimum upfront student contribution for government-funded courses at certificate three level and above, with exemptions for disadvantaged students.

That would “encourage the student to conduct due diligence into the value of the course” and avoid perceptions that government loans were “free money” to study, it said.

Freedom of information documents obtained by the ABC in 2019 suggested the government could save $46m over a decade by recovering student debt from deceased estates.

The idea had the backing of now assistant minister to the prime minister, Ben Morton, Labor MP Julian Hill and the Grattan Institute but was never enacted.

Australian students owe the education department approximately $58bn in unpaid loans.

The Productivity Commission also wants to see more competition between the Tafe training system and private providers because “public provision is not necessarily the only or best option”.

Funding to Tafe should be “based on explicit and transparent [community service obligations], which should be subject to market testing”, it said, allowing private providers to win funding instead. Public providers should also have “greater operational autonomy”.

In May, Scott Morrison suggested the federal government would look to add conditions to its $1.5bn in skills funding given to the states and on Tuesday he nominated skills reform as a major priority for 2021.

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The Productivity Commission said that public funding to the sector should remain “largely untied” but endorsed calls for “much greater accountability and transparency” in a new national agreement on skills.

The commission found that “mixed progress” had been made against existing targets.

The aim to halve the proportion of the working-age adult population who lack at least a certificate three qualification was “not met”, despite an improvement with 62% holding one in 2019 up from 53% in 2009.

The target of doubling the number of higher-level qualifications was also “not met”, as completions fell from 43,000 to 38,000 over the same time period.

Between 2009 and 2019, the proportion of employers who said they were “satisfied that training meets their needs” fell from 86% to 79%.

There was an improvement in the working age population working towards a non-school qualification, although the latest figures relate to 2018 before the coronavirus pandemic.

The commission concluded that the national agreement for skills and workforce development had failed to hold governments to account for the performance of the training system.

That was because targets “were arbitrary and too ambitious”, and not linked to the program inputs and outputs but rather influenced by outside factors including higher education policy and economic cycles.

The agreement “does not provide for review and evaluation”, it said, a function that could have been performed by the Council of Australian Governments reform council – junked by the Abbott government in 2014.

The Productivity Commission said governments could achieve a “better return” on investment by using cost estimates by the National Skills Commission “as a common basis for setting and simplifying course subsidies”.