Vocational trainers and their brokers who look for sneaky ways to get around toughened regulations on recruiting students have been warned to be on their best behaviour.
The federal government will not tolerate any flouting of the rules, including a ban on offering laptops, iPads, cash or other inducements for students to sign up to courses.
And soon it will be carrying out full-blown investigations into educators, not just audits.
Training minister Simon Birmingham's warning comes after revelations about the behaviour of training company Phoenix Institute and its student recruitment broker Education Circle.
Allegations Education Circle recruiters had signed up people with intellectual disabilities to Phoenix Institute courses, helped people pass literacy and numeracy tests and continued to offer laptops were "deeply disturbing", Senator Birmingham said.
"If proven correct these allegations are an example of the worst type of behaviour ... that is bringing down the reputation of training in Australia," he told reporters in Canberra.
He was particularly concerned if trainers were finding "sneaky ways" to get around the ban on inducements.
The federal education department and vocational regulator ASQA was already investigating Phoenix Institute and Education Circle before the media reports.
Senator Birmingham has asked them to look at suspending Phoenix's access to government-backed student fee loans and revoking its training licence, and to examine any other training providers using Education Circle's services.
The problem for the government is when people sign up to vocational courses, even if they're incapable of completing them, they are eligible for taxpayer-funded VET FEE-HELP loans to cover fees.
The loan scheme has blown out rapidly since Labor expanded it in 2012.
"It's not fake money that goes on VET FEE-HELP, it's a real debt," Senator Birmingham said.
"(It) will impact on your risk profile in terms of getting a home loan or a car loan or other types of credit."
Labor is concerned "rip-off merchants" still seem to be able to roam free in the vocational sector.
"The desperate rhetoric of (the government) will not change the simple fact that you have let them get away with it," higher education spokesman Kim Carr told the Senate.
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