This paper reviews the nature and implementation of the Australian VET FEE-HELP (VFH) policy initiative: a scheme introduced in 2008 to extend income-contingent loans to the vocational education and training (VET) sector in Australia. The implementation of the scheme has been seriously flawed, leading to a range of counter-educational and unethical practices on the part of some VET providers. An ongoing research project into the impact of the changing contemporary cultural context of VET on the creation of moral dilemmas facing VET teachers in their work has identified four dilemmas that were seen by teachers to be significantly driven by the VFH scheme. That notion of a moral dilemma is grounded in a phenomenological account of ethics and morality, implicit in the work of Bagnall (2004), where morality is a matter of doing what is right in each situation in which one finds oneself, involving the capacity, sensitivity, courage and understanding to ascertain what one should do in each situation and to act on that understanding. The phenomenological study by the lead author draws primarily on exploratory, discursive, conversational interviews with 19 VET teachers in South-East Queensland, selected from those responding to a call for participation in the study. The focus of the interviews was on existential issues arising from changes in the contemporary VET teaching context, rather than explicitly on dilemmas, to ensure that important material was not avoided or lost through any confusion of meanings. The dilemmas per se were identified by the researcher in her interpretative analysis of the interview transcripts. The four dilemmas that were seen by teachers to be significantly driven by the VFH scheme: those associated with (1) unethical student recruitment and enrolment practices, (2) overlooking traditional educational standards, (3) constraining teacher responsiveness, and (4) manipulating learning assessment. The identifying teachers saw themselves as being professionally unprepared to handle such moral dilemmas, leading to discomfort and ill-informed and inappropriate handling of the dilemmas.