Recently in the Australian newspapers there was a story about 15 students who were taking a very large flight school to court for not meeting the students’ expectations for their Commercial Pilot Licence (CPL) flight training. It was no surprise that 99 percent of this school’s training was conducted under the Vocational Education and Training (VET) Student Loan program.
I have been in the industry for over 30 years and owned a busy flight school for almost 10 years. While the majority of my flight school’s training is recreational and we do not qualify for VET loans, I know a lot of instructors who have worked in a VET Loan funded school and some of the feedback is not good.
The news about the 15 students who are taking this large flying school to court is, I believe, just the tip of the iceberg in relation to the current problems with the VET fee program. The reality is, most CPL students are afraid to complain because they are so desperate to obtain their first job in aviation. In Australia, the aviation industry is still a fairly small community and no one likes to be branded a complainer, plus, most employers will ring the training organisation or expect a reference from them, so most students realise that it’s easier to just shut up and hope for the best.
How does the VET Student Loan program work?
The program is a loan scheme which assists eligible full fee paying students studying an approved VET course, to pay their tuition fees. The loan for flight training is up to a current limit of around $104,440, and up to $150,000 from January 2020. To be eligible for inclusion in the program, flight schools need to have their own Part 141 and 142 and be a registered training organisation (RTO) with the government plus follow some other strict rules.
Currently students only have to start to repay the amount after their wage or salary is above $51,957 (or for 2019/20, above $45,881). The government also charges around $17,000 in administration fees AND the loan increases each year with the consumer price index! Here’s an extract from the Government’s VET Student Loan Information booklet:
A 20 per cent loan fee applies to VET Student Loans for full fee paying/fee for service students. The loan fee does not count towards your FEE-HELP limit. You do not have to pay the loan fee upfront – it is added to your HELP debt at the ATO. For example, if you are undertaking a course that costs $1,000, the loan fee is $200 (i.e. 20% of $1,000). So your VET Student Loan debt for that course will be the cost of the course ($1,000) + the loan fee ($200) = $1,200.
VET Study Loan is too easy to get for both the flight school and the students
Currently, with most schools eligible for VET study loans, the entry requirements are fairly basic as far as minimum education or aptitude tests. There are some schools that do run test screening and interviews for potential flight students (similar to airline-type interviews and testing) but this is quite rare. The reality is that learning to fly to PPL level is hard, but achievable, for most students. Completing your flight training to CPL level is a whole different story – and honestly not everyone has what it takes to be a commercial pilot. That’s why airlines and the Air Force don’t just hire anyone who wants to be a pilot. Every specialised career requires certain personal, mental and emotional traits for that specific career. For instance, I would make a terrible pro tennis player no matter how much I wanted it.
I support some type of VET Study Loan or similar program but I believe the current system is broken and is permitting some CPL students who shouldn’t be allowed, or encouraged to continue, when the school knows those students will struggle to meet CPL standards.
It is frightening to think that many of the flight schools which utilise VET fee are using it for more than 90 percent of their students. This goes against basic business fundamentals: you should never rely on a single revenue funnel or have a single point of failure for your business. If the government of the day decides to make changes or stop VET loan funding (which they can at any time) flight schools which are dependent on it could collapse overnight, and this has happened already in Qld.
Many of the VET loan schools see VET Study Loans as a fairly easy and constant source of cash flow. The issue with this is that over time, this easy cash erodes basic common sense and can lead to dishonest dealings with flight students about their ability to become a commercial pilot.
Imagine if you ran an acting school and you were desperate for students. A student walks in and says ‘Here’s $100,000. Please teach me to become an A list actor’. Then, after a week of training them, you realised that this student would never be a great actor. Would you give them the $99,000 back and tell them, ‘Sorry, but we can’t help you. You will never be good enough.’ Probably not. The temptation for many flight schools is to accept the money and just hope the student finally improves. Money has a tendency to dilute common sense.
An Instructor who was teaching at a large school told me that less than half of the students passed their CPL flight test at the first attempt. Also, many of the students were not CPL material but the school just kept training them anyway because they were VET loan funded. Getting a student to PPL level is possible for most instructors but getting them to CPL level is a lot harder.
I have also had a few students who quit their VET loan funded school (before their debt was too great) and then completed their training at my school using their own money, as they deemed the training and cost at the first school to be unreasonable. One of the students had racked up a debt of $20,000 and had not yet gone solo or been advised about any potential issues as to why they hadn’t achieved solo. Once again, the student did not wish to complain because they eventually wanted a job in the industry.
Students do not understand the price of each lesson
It would be unfair if I blamed all the current problems facing VET loan on government policy and some greedy flight schools. Part of the current issue is that students who receive VET loans don’t really understand the actual costs because they have not had to work for each flying lesson. Most of my students pay for their own flight training. They can see the connection between how many hours they have worked, and how many hours of flying they can afford. They will correct us very quickly if we accidentally enter the wrong hobbs and overcharge them by .1 of an hour! Paying for one’s own flight training tends to weed out those who really want to fly and those who just like the idea of being a pilot. If a student paying with their own money is not happy with the level of service or training, they will simply take their business to another school.
I believe there needs to be a public conversation and that both the General Aviation and Recreational Aviation flying schools should be involved in the debate on the future of VET loans so we can create a funding scheme that’s fair for all flight schools and students.
To start the conversation, I have outlined below a few suggestions:
Suggestion 1: New entry requirements for VET study loans
To prove that the applicant is both keen on becoming a pilot and can meet the educational requirements, I propose that there are some entry requirements for VET loans for pilot training. This would prove that the applicant has the motivation to at least save and pay for initial flight training themselves and can actually fly a plane to solo standard.
Suggestion 2: VET loan paid in stages and offered to all flight schools
The CPL theory course is complex and hard. The issue with the theory component is that a lot of students only start sitting their CPL theory exam towards the end of their physical flight training. If they don’t pass the theory, they cannot obtain their CPL.
Stage 01: CPL theory VET loan
If the student has already gone solo then they could apply for the ‘Stage 01: CPL theory VET loan’ component. The first stage of the VET Loan would be a $6,000 amount to attend a CPL ground school with one of the approved CPL theory providers across Australia. Only if they have passed all the CPL subjects can they then apply for the second stage of the VET study loan.
Stage 02: PPL VET loan
‘Stage 02: PPL VET loan’ funding would be up to $20,000 to achieve PPL level or 60 hours of dual lessons and solo flying .This can be conducted in both Recreational Aircraft and General Aviation aircraft or a mixture of both. Only when the student passes their PPL can they then apply for stage 03 funding.
Stage 03: Command building VET Loan
‘Stage 03: Command building VET Loan’ would be for up to $30,000 to build 100 hours of command time in either a Recreational or General Aviation aircraft. Before being approved, the student must have an independent audit from a qualified Instructor to see if they have the potential flight standard to continue to CPL.
Stage 04: CPL training VET Loan
‘Stage 04: CPL training VET Loan’ would be for up to $20,000. The student can apply for this stage once they have their command time to complete the final CPL training.
Stage 05: Instrument and Instructor rating
‘Stage 05: Instrument and Instructor rating’ would be up to $50,000. This stage is for completing either their Twin Engine Instrument rating and/or Instructor Rating and can only be started once the student has passed their CPL flight test.
Under this arrangement, each new stage can only be started if they have passed the previous stage. And importantly, the student can change to another school at any time if they are not happy with the level of service/ training provided by that school.
Currently, only flight schools that can afford the expensive processing and approval process to become a registered RTO can get VET loan approval. This means VET study loans are only available to larger schools which leads to a winner-takes-all situation where only a few players have approval, and leading to limited choices for potential students. It also makes it unfair to the other flight schools that are not large enough to afford the overheads that are required to become a Registered Training Organisation.
Suggestion 3: Training standards and consistent auditing
A lot of the arguments I hear from other instructors and pilots sound like this: ‘If we open up VET loans to all flight schools then the training standards will reduce.’ The current reality is that we have students taking flight schools to court and the low number of students passing their CPL at many of the VET loan schools prove that being both part 141 and 142 and RTO approved is not always a prerequisite for customer service or quality flight training.
My suggestion is that if a school wants to be a VET study loan school it has to pay a $5,000 per year processing management/auditing fee. This would give them access to an online student management system that can be audited by an approved government or independent auditor who would audit the school and the students’ flight training standards every 12 months. The audit would include a qualified independent Instructor to fly with random VET loan funded students to ensure standards were being maintained. This fee would also pay for a complaint and resolution service for the students. If a school fails their audit three times in a row then they are de-registered for VET loans.
The government could save millions
I suspect the government would actually save millions by implementing this plan. If the entry requirements for students were tougher and the funding was available to all flight schools it would keep the entire industry honest and fair. Personally I always encourage students to pay for their own flight training if they have the ability to, because a debt is still a debt hanging over you regardless of how attractive it looks upfront.
There are still a lot of VET loan approved flight schools that are doing a great job and are completely honest and transparent with their students about their progress. However it only takes a few larger VET loan funded schools to be greedy and completely destroy a government program that was designed to assist the General Aviation businesses and to alleviate the impending pilot shortage.
It will be interesting to see how the court challenge by the 15 students progresses. Just this week the TAFE partner of the flight school has suspended flight training and demanded to see some documentation. Hopefully the Government will come to realise that just throwing large sums of cash at a limited number of approved schools isn’t the only way to overcome the impending pilot shortage.
As always, I’m interested in hearing your thoughts.
CEO, GoFly Group
4 November 2019
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