How For-Profit Colleges Trick Students Into Expensive, Useless Degrees

UPDATE: Since this story was first published, it's been revealed that private colleges in Australia have very low completion rates—some with as few as 1.7 percent of students graduating. At the same time, the Australian Government is paying these colleges more than $260 million a year in taxpayer money.

It came as a shock to William Ellis when, in December 2015, he received a $7,000 bill in the mail for what he thought was a free, government-funded online course in "business management and leadership." A few months earlier, the 19-year-old had started looking around for part-time work on a website called OneShiftJobs.com. About a week later he got a call. There was a woman on the other end of the line who wanted to talk to him about studying online. She never mentioned how she got his number.

William, who'd spent most of his time as a teenager recovering from knee surgeries—three of them—had never obtained any on-the-job experience. "Don't you want to become more employable?" the voice on the phone asked. Of course he did. "Okay, we'll sign you up right now."

And soon William was scrambling around trying to find his tax file number, passport number, and birth certificate. He called his parents in a panic asking where the documents were. When his son told him there was a woman on the other line waiting to sign him up for a free, government-funded course, William's dad was immediately suspicious. But William didn't listen.

"It makes so much sense in hindsight, but in the moment it sounded so appealing," William explains. "For me, someone who's had to deal with injury, with a whole bunch of things. The idea that this would be my break, would get me a job—it sounded amazing."

During those first few months, everything went fine. William says there wasn't really much structure to his course, and his trainer—who was assigned to help him if he didn't understand the coursework—sometimes didn't have the answers to his questions. But it was an online course, he didn't expect it to be exactly like uni.

And then, the bill arrived.

The woman on the phone had never discussed money with William. He says now he can't believe he was so gullible, that he didn't investigate it more. In online forums he and his dad found so many people with exactly the same story—scores who thought they were enrolling in a free course, funded by the government, and instead ended up getting hit with bills of $20,000 and more.

Last week the company that signed up William, Careers Australia, received a huge fine from the Australian Competition and Consumer Commission (ACCC) for engaging in "unconscionable conduct" and breaching Australian consumer law. Already, the company has had to cancel more than 12,000 enrolments and pay $44.3 million back to the government.

Careers Australia has admitted that it targeted vulnerable job seekers, people with intellectual and physical disabilities, and teenagers at their homes in some of Australia's poorest regions. It often offered inducements, such as laptops and iPads, in an attempt to get more students signed up. In one case, 80 people from a remote Aboriginal community in Queensland were signed up, accruing tens of thousands of dollars of debt, without ever being told the courses would cost them money.

"Between 1 August 2013 and 31 March 2015, Careers Australia received and processed applications from around 40,000 students for enrolments into its VET FEE-HELP courses," the ACCC's statement explains. Around half of these people were actually enrolled, netting $190 million in VET FEE-HELP fees that was paid by the government directly to the Careers Australia, not to the students.

Mick Bellairs from the Consumer Action Law Centre says William's experience is common for students signing up to these private vocational colleges. "Between 2012 and 2015, we saw a huge amount of cases," he explains. "These students, they were being promised the world."

And they were also being promised that their courses would be free. The reality is that, similar to HECs debt, VET FEE-HELP is a loan—people won't have to start paying it back until their income exceeds the threshold of around $53,000 a year. Research from the Grattan Institute shows that only 40 percent of people who take out these loans will never earn enough money to start paying them back.

However, as Mick explains, even if you never earn enough to have to start paying, it's still a debt. If you're applying for a mortgage, or a car loan, or even hoping to take on other further study, it will still be hanging over your head."The people we see, the people who were tricked into enrolling, they have nowhere else to go," Mick says. "In many cases, they have to take legal action to try and get this debt cleared."

And it's not just Careers Australia, the ACCC is also currently investigating Acquire Learning, the Australian Institute of Professional Education, Empower Institute, Unique International College, and Phoenix College—which Fairfax labelled "a multimillion-dollar get-rich-quick scheme masquerading as an educational institution." Unlike TAFE, the fees at these private colleges aren't regulated, so they regularly scoop 50 percent profits on their courses.

The students who walk away from these courses with a diploma are actually pretty rare. Only about a quarter of people who enrol with a VET FEE-HELP loan will graduate within three years. While this includes TAFE, if you just zero in on online courses—like what Careers Australia was offering William—the numbers get pretty dire with only seven percent of students actually finishing them.

This is where William is at. He already tried to cancel his enrolment back in December, although it wasn't easy. Over the phone Careers Australia urged him to reconsider dropping out, to take some time off to think about it. He says they offered to delay the date he needed to decide by.

But when William told Careers Australia a few weeks ago that he'd decided not to continue the course, he was told he'd have to pay a fee—because the census date had passed. He's heard nothing from the company since; no calls, no emails.

William says he's not yet sure whether the ACCC decision means he'll be able to recoup his $7000 worth of fees. He is hopeful but one big challenge is that Careers Australia always spoke to him on the phone and he didn't record calls, so there's very little written proof of what he was told.

Subsequently, Mick's advice to any student from Careers Australia who is trying to cancel their enrolment and get a refund for their course, make sure you get everything in writing. According to the ACCC, Careers Australia has so far cancelled over 12,000 enrolled students "and either repaid or partially repaid to the Commonwealth amounts totalling at least $44.3 million."

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