The federal government says the existing Commonwealth loans scheme for students undertaking vocational education and training will be shut down at the end of the year in response to widespread rorting of the industry.
Measures introduced by the Labor government in 2012 expanded the VET FEE-HELP program by removing the original requirement for colleges to have credit transfer arrangements with a higher education provider.
In the time since it has emerged that some colleges have been exploiting the system to the value of more than $6 billion.
Education Minister Simon Birmingham admits the government's attempts to address the industry's problems haven't worked and starting over is the only way forward.
"It's become apparent that to truly fix the VET FEE-HELP scheme we first need to exit, that the scheme is fundamentally broken from its construction and design and that we need to build a replacement model from the ground up. And by axing the VET FEE-HELP scheme we can be absolutely confident that we, therefore, get rid of the rogue providers and shonky operators from any new model without the type of legal impediments and court challenges that we've been facing as a result of our action to date."
Tougher restrictions on eligible private college courses, loan caps and student engagement requirements are among the changes due to come into force in 2017.
Providers will also be banned from using recruitment brokers or directly soliciting prospective students.
Previously, it was found, that some students had been persuaded to enrol in courses by the offer of free iPads and laptop computers.
There were reports, too, of people - including those with intellectual disabilities - being registered for online diploma courses they were not expected to complete.
Prime Minister Malcolm Turnbull says the actions of some institutions were unacceptable.
"This has been a series of rorts, it has to be brought back to a scheme with integrity since we've been in government we have made changes to it but it needs root and branch reform and so the old scheme has been shut down, as Simon Birmingham has announced, and a new approach will be undertaken and that will have caps on loans and a rigorous oversight to ensure that providers are all ones that are providing training schemes in areas that are needed and are providers that are operating with integrity."
Some colleges were found to be charging up to $30,000 for courses, leaving students with considerable debt.
Education Minister Simon Birmingham told the ABC the government will work with the Australian Competition and Consumer Commission to investigate their circumstances.
"We're not proposing massive waivers because, of course, many students did sign up knowingly to what they were entering into. But where there are breaches of consumer law we will be working as hard as we can with the ACCC to make sure prosecutions occur and where there's evidence that people were misled into signing up to a course, then of course they can expect that those cases should hopefully lead to debt waivers."
The Australian Council for Private Education and Training is the main body representing private providers of vocational education.
The Council's CEO Rod Camm says it supports the need for an overhaul of the loans system, but there was no consultation with the sector before the changes were announced.
"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. Our general reaction is we're quite concerned that there's been no consultation about these changes with ethical educators and therefore we are worried about some of the nuances of the detail and some of the impact it might have on the sector."
The opposition leader Bill Shorten has been attending the TAFE Directors Australia Convention in Melbourne.
He says the government has made a 180 degree back flip in its position having previously said Labor's call for action was an attack on private education, and any changes would be an administrative nightmare.
Mr Shorten says the government isn't responding well to the needs of students wishing to undertake vocational education as an alternative to university studies.
"The Turnbull government is still out of touch when it comes to apprenticeships and TAFE. What will drive the best training in the future for our young people and mature age workers is a strong public TAFE sector. They still see TAFE as a code word for cuts and not investment. We've seen 130,000 apprenticeships disappear under the Liberal government in the last 3-plus years. Until the Liberal Party back TAFE as their number one in the training sector and do something about employing and supporting tens of thousands of new apprenticeship places they're still going to be out of touch."
