The Federal Government is hitting the "reset button" on the VET FEE-HELP student loan scheme in an effort to protect the integrity of the system and save taxpayers $7 billion.
The scheme- introduced by the Gillard government in 2012 - deregulated fees which led to unscrupulous providers taking advantage of thousands of students, signing them up to overpriced courses they could never complete nor pay for.
"It's become apparent that to truly fix the VET-FEE HELP scheme we first need to axe it," Education Minister Simon Birmingham said.
"The scheme is fundamentally broken from its construction and design and we need to build a replacement model from the ground up."
VET-FEE HELP as Australians know it will be axed from December 31, 2016 and replaced with the newly named VET Student Loans system.
The scheme will cap loan limits at $5000, $10,000 and $15,000 depending on the cost required to teach the course.
"You have to recognise and accept that there are a range of different costs of delivery for different qualifications," Minister Birmingham said.
"Diplomas in business or management can be delivered far more cheaply than diplomas in agriculture or engineering."
Furthermore the Federal Government plans to implement strict access requirements for providers wanting to participate, although TAFE's and public providers will have automatic access to the system.
"Yes we are giving them automatic entry into the new scheme but there are problems there that need to be addressed there as well."
The Gillard government introduced VET FEE-HELP scheme blew out from its original budget of $325 million in 2012 to $2.9 billion in 2015.
Labor welcomes the changes but is trying to claim credit for the reforms highlighting its election pledge to cap course fees to $8000.
"I love this Turnbull government, they want to pretend that when it comes to bad news they haven't been in government for three plus years," Opposition Leader Bill Shorten said.
"They've had two Liberal prime ministers, they've had five ministers for training, they've had three years and they've had billions of dollars washed down the drain because they can't run an apprenticeship and training system in this country."
A list of more than 800 diplomas and advanced diplomas currently subsidised are expected to be dwindled down by more than half under the new changes.
Providers will also be restricted from using "brokers", who directly solicit prospective students into courses at education institutions.
"We'll also put in place provisions for enrolment caps. Providers will be expected to advise the federal education department of their intended enrolment numbers," Education Minister Birmingham said.
It's expected the changes will save $7 billion over the forward estimates, working out at $25 billion in savings over a decade.
The Australian Council for Private Education and Training said while it supports the need for an overhaul of the system there was no consultation with the sector.
"We think it's not before time, the sector certainly did need reform so in that sense they've been much needed, albeit far too late and far too close to the implementation date," The Council's CEO Rod Camm said.
The Coalition plans to release the legislation next week and has offered a briefing to the Labor Party.
