Former students demand the government wipe out the student financial supplement scheme debt

While Prime Minister Anthony Albanese has moved to alleviate the financial strain of HECS-HELP debt, a separate group of former students is calling for action on a different, often-overlooked debt trap that dates back to the 1990s. Around 140,000 Australians are still grappling with a collective $2.1 billion owed under the now-defunct Student Financial Supplement Scheme (SFSS), which ran from 1993 to 2003.

Introduced by the Keating government, the scheme allowed students receiving welfare payments like Austudy or Youth Allowance to trade their entitlements for a loan, which was then doubled. In essence, students who were already struggling financially were given the opportunity to access twice the amount of their benefits, but with the understanding that they would later repay the larger sum.

The scheme was later continued by the Howard government, but it was eventually scrapped in 2003, after growing criticisms that it had trapped vulnerable young people in a cycle of debt. It was branded a “debt trap” by many, with some participants now describing it as a misleading and financially damaging scheme that they did not fully understand at the time.

One of the key figures in this growing movement is Dee Marshman, who, at 17 years old, was offered the loan during her first year at university. Having faced homelessness and a turbulent family environment, she saw the loan as a potential solution to her financial struggles. However, with little understanding of the long-term consequences, she traded $17,000 in welfare entitlements for a $34,000 loan.

Reflecting on her decision, Marshman admits that she lacked the financial literacy at the time to fully comprehend the implications of the deal. “Looking back, I didn’t understand what I was getting myself into,” she said. Now, like many others affected by the scheme, she is pushing for the government to forgive the debt.

The issue has gained traction as more former students from the scheme are coming forward, with about 350 individuals already registering interest in a potential class action lawsuit against the government. They argue that the government has a responsibility to address what many see as an unfair burden placed on young people who were financially vulnerable at the time of signing up for the loan.

With the Albanese government already focused on reforming the HECS-HELP system, the calls to address the lingering debts from the Student Financial Supplement Scheme present a new challenge. Critics argue that wiping out this debt would be a fair and necessary step in acknowledging the mistakes of past policies and helping those who were ensnared in a system that was, at best, a short-term fix to long-term financial hardship.