Student Financial Supplement Loan - Participants in significant financial distress!

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Student Financial Supplement Scheme

GOVERNMENT NEEDS TO TAKE ACTION IMMEDIATELY AND REDUCE EXISTING DEBTS FOR DISADVANTAGED PARTICIPANTS OF THIS SCHEME

The Student Financial Supplement Scheme was introduced from January 1993. It was initially referred to as the AUSTUDY/ABSTUDY Supplement. Opposition from student unions, parent organisations and academics was fairly strong due to fears that loans would eventually replace Austudy payments and that students would be increasingly loaded down with debt. The supplement and Austudy were administered as part of the education portfolio until the introduction of Youth Allowance in July 1998. At that time responsibility for the supplement passed to the Department of Family and Community Services (Department of Social Security until October 1998) and it was renamed the Student Financial Supplement Scheme (SFSS).

The scheme offered loans of between $5000 and $7000 per annum to Youth Allowance, Pensioner Education Supplement, Austudy Payment and ABSTUDY recipients who trade in one dollar of their income support entitlement for every two dollars of loan received. Other students qualified for a loan of up to $2000 if they were a dependent tertiary student who was not eligible for income support, but would have been if not for the Parental Income or Family Actual Means Test and the adjusted parental income and family actual means is below $64 500.

The Scheme provided a voluntary loan whereby eligible Category 1 tertiary students trade-in $1 of their income support for $2 of loan (up to a maximum of $7000). Category 2 students are those dependent young people not receiving youth allowance as a result of the Parental Income or Family Actual Means Test and whose family income is below a prescribed threshold (less than $64 500 for 2003). Category 2 students are able to apply for a loan of up to $2000. For those Category 1 students taking a loan the income support traded in becomes part of the loan, all of which is repayable. The closure of the Scheme was in response to increasing levels of bad and doubtful debt and reduced take-up of loans.

The Commonwealth Bank of Australia provided funds for the loans, through an agreement with the Commonwealth Government. Repayments did not have to commence until five years after the loan was taken out when the loan contract period with the bank ends. Voluntary repayments made during the contract period attract a 15 per cent bonus. When, after five years, the contract period has expired, the Government pays the bank the amount the student still owes and collects the debt through a HECS style arrangement administered by the Tax Office. Repayments only start when the student's taxable income reaches the minimum threshold ($54,869 - 2016).

This scheme has disadvantaged thousands of Australians who are now in 2016 struggling to repay their debts.  Further, interest is continuing to be added to the outstanding debts crippling people and their financial livelihood. 

We are seeking for all existing debts to be waived and indexation (interest) to cease immediately in light of the impact that this had on the scheme participants and high levels of debt that they face and continue to face year after year.  The government has deceived people where an income support entitlement was traded in for a loan that essentially operated as a hidden interest charge.  Furthermore, the people that took out the loans were financially distressed and majority were young students.

The Howard govenment axed the Student Finanical Supplement Scheme in 2004 indicating that there were significant issues with the scheme yet the people who were misled and took out loans on the scheme are continuing to suffer and continuing to have higher and higher debts due to interest.

The scheme was a poorly designed policy that increased the debts of students in the worst finanical position.   If the government is genuinely concerned about our future debt, then they will look at our they disadvantaged thousands of Australians and take immediate action to remedy the situation. A lot the participants with SFSS loans also have HECS loans that they continue to pay placing further stress on finances. The Government has closed the scheme on 1 January 2004.

We request that the Government review the closure of this scheme and the financial impacts that participants face and that the Government take responsibility for this scheme and offer compensation to current participants.  We are seeking for all existing debts to be reduced by 50% and interest to cease immediately. 

These are some of the comments from people who have been struggling to re-pay their SFSS. 

March 9, 2009 - I finished uni early because I was pregnant (end of 1995). I am now a married mother of 2 and have only been able to get casual jobs. My income has never been, or will be as far as I can see, $39,825 or more because I have been out of the workforce raising children and I my uni qualifications are out of date so no employer would employ me. The loan keeps increasing every year. I am worried that I will never be able to repay it and am concerned that if I die the loan will be taken out of anything I may have in my will. It’s not that I expect I will have anything much but will my children or husband be burdened with this loan?

January 16, 2010 - The only time the SFSS loan is written off, is when we die! I have a small SFSS loan, of $4000, my concern is that with the accumulating interest, if I do suddenly get past the threshold, I will then have to pay it, at a time when I might need the money. It was such a rip off, trading in welfare payments for the loan.  Oddly some people would be better off taking out a loan to pay it off, and then go bankrupt imho.

January 16, 2010 - Unfortunately once the SFSS is passed into the hands of the ATO their isn’t any options to make a voluntary payment. The only choice is to pay it off once your income has passed the relative thresholds. @ Em, I agree it was a rip off, trade in $50 of Centrelink payments and receive $100 of SFSS and then pay back $100 of SFSS.

August 5, 2015 - Back in the mid to late 1990s my husband and I had to access SFSS as we were both at Uni full time with 2 little children and couldn’t survive without it on Centrelink. We are still paying this loan off after 14 years!!! It was so long ago now but I told my husband last night that I remember us sacrificing $3500 in centrelink payments to get $7000 for the year. A major “rip off”. So we were given $3500 but are paying back $7000. Hubby doesn’t remember this at all and thinks I’m mistaken but after reading your post I know I’m right. We got $7000 a year for 4 years to help us get our degrees and live. I’m going to throw a party once this thing is finally done and dusted.

 April 29, 2010 - I got my suppliment loan out in 1999 and am still paying it back – I don’t get a tax return – I get a tax debt. The last couple of years I end up paying out my tax return onto the loan and then some – only for the ATO to charge me another $500 increment. I wouldn’t have been able to pay rent and study if I didn’t get the loan out because of the pittiful fortnightly benefit handed out to students. I have worked ever since and pay enough tax into the system without the government taking more cash off me.  If the federal government wants to really help australians they should provide better financial support for those who are trying to gain qualifications and participate in working society.

June 1, 2010 - I have just gone up a tax bracket & found that my SFSS loan has sky rocketed with the annual indexing rate. Everyone I talk to is confused about what the SFSS is. I am getting plenty of info on HECS. I cant see that going up a tax bracket is going to benifit me, things look worse than they did before. As hard as I work at paying this off, it continues to grow. Good scheme? No, good scam by by the government. Does this debt die with me or will my kids end up paying for my misinformed decision. Oh and if anyone thinks Salary sacrifice is going to help, remember the tax dept has got you there too, dont forget you have to gross up your wage, that may throw you into yet a higher tax bracket and youll have to pay more.

March 17, 2015 - I owe over $40K I’d be happy to join a class action – has anyone started?. I have had contact with the academic that helped the govt formulate this scheme – he of course was surprised that I spoke of it as a poverty trap for the disadvantaged! He was happy to meet me and talk to about it but I havent taken it further with him as I just felt it was pointless fighting the govt! but hey maybe i’d be up for joining a group action.

March 26, 2015 - Yeah i got one 13 years ago. I cant believe it was even legal. I couldn’t get a bank loan so how was it possible to get this? I’m a single mum with three kids now, I want to clear this debt so I can move forward with my life. I feel exploited, as I was a teenager from a broken, low income home. I cant even imagine what I was thinking. I don’t remember even discussing it with an adult. I don’t know what to do?

July 8, 2015 - I took out a SFSS loan in 1994. I remember being told that if I didn’t earn enough money in ten years from taking out the loan then the debt would be wiped. Well it has been 20 years and it keeps going up and up. This year is the first year my income is over the threshold and I will have to start paying it back. I can’t even remember how much my original debt was but I have over $10000 now. 

July 10, 2015 - Wow I’m so glad I have seen this page. I cannot believe so many of us were scammed like this and still nothing has been done. My loan was only small about $2500 but its nearly up over $5000 now!!!! It’s only now after reading this page am I finally understanding it. I surely didn’t back then in 2001. I should have got out when I could back then. I didn’t even have enough money to pay for the course. So in turn I owed this loan and the course as well and never got my certificates. I also have never gone back to the profession I studied so it was a complete waste of time. Back then if I had paid the course I could not even cover my rent so of course the rent, bills and food came first. Surely if this can be proved that it was such a scam someone has to do something about it!!!!!!! I have just signed to petition but I think what we need now is someone who knows the legal system who will fight for us!!!! I know I have ignored it for years just hoping it went away but clearly it hasn’t. I wonder how many others have done the same. I was actually secretly hoping at the end of this feed I would have found a solution. If anyone know of a lawyer that would take this on, lets do it!!!!!!!

July 29, 2015 - Something has to be done about this – I have a debt of over $50,000. I was young and had no idea of the financial implications at a time when I was struggling to meet basic needs whilst studying. It is evident from the article above that SPSS was scrapped as it was poorly designed and people were being ill-informed.

July 31, 2015 - Ditto on all the above. I just came back from my accountant to sort out tax and I for the first time had to pay tax vs getting a return to help my family out. How could this possibly be the case… give up study money e.g. $1000, get $200, then pay back $200. Effectively have lost 100+200 dollars! How is it possible for a teenager to be able to plan ahead for this event. I am all for action against the government allowing the CBA to cam its own people… kids no less. How can this be allowed? Now they are saying if we obtain permanent residency in another country, they have plans to chase us down. There’s no escaping this financial leach!!!

August 8, 2015 - I too made the stupid decision to take out three of these loans – the first one before I was even considered old enough to vote! It is absolutely disgusting how the government ripped off students, some of who weren’t even 18 yet. I’m so ashamed about this too, as I was vaguely aware that it wasn’t a good idea and my parents warned me against it, but as a poor student living out of home and studying a design degree that required a lot of materials, It seemed like the only option. I had no idea it would affect me so much later in life. My debt was at about $25k at its worst and 18 years later is now sitting at around $14k. I have earnt over the threshold for some time and have basically got used to the idea that I won’t have a tax return each year. The worst situation for me was the year when my employer forgot to ‘tick a box’ when I moved to a new area and the deductions weren’t taken out – I got a bill of almost $2k. For the rest of that year, I not only had to pay back my debt to the ATO but I also had to make extra compulsory repayments as I’d done my return late that year. Now I have a child and a mortgage and I’m studying at uni again. I was shocked to find out today that my newly accrued HECS debt and SFSS debt are not consolidated (for some stupid reason I thought they would be put together), and I have to pay about $4k a year off HECS and $2k a year off the SFSS, earning about $70k a year. Back in 1998 $70k pa used to be a lot, but these days it’s just average – especially when you take into account child care and mortgage payments. To top it off my partner underestimated our income last year by $700 and so we got the family tax benefit when we shouldn’t have. We are absolutely crippled with ATO debts that they won’t consolidate. I think I’m going to have to quit uni and I actually think I’d be better off earning $15k less. It’s so depressing. The SFSS is the worst though, as it was just so unfair! It has been hanging over my head for way too long and I just feel so angry that the government got away with it.

October 13, 2015 - I just checked my Supplement Loan debt taken out in the year 1999 which was once $7,000. My debt has now ballooned to $15,000. Add my HECS debt on top and I owe over $30,000! I cannot believe how the Commonwealth Bank, Centrelink and ATO can justify borrowing half and paying back double. Ethically it doesn’t make sense. Like others, I was not clear of the ramifications with this scheme particularly 15 years later and now owing $15,000.

November 6, 2015 - I haven’t managed to read all the comments but I agree with those I’ve read. Yes, we were ripped off by CBA. My debt now increases by around $1,000.00 per year. My debt is now $38,327.00 originally taken out merely to survive whilst I studied. The only winner- CBA!

January 8, 2016 - Has anyone here who took out a student supplementary loan with the CBA before the ATO took over the loans still got a copy of the contract? I’m interested in the terms and conditions of the loan (I lost mine). I’m also interested if anyone still has any literature (brochures and the like) on the loans being publicised and what was being held out by the bank to induce students to sign up. I remember something like “interest free” was included.  Interestingly, I phoned the ATO this morning to ask if they had a copy of the original contract that I signed (as the government is now the legal owner of the chose of action (debt) which was bought back from the CBA after the first five years of the contract. They did not and advised me to contact the CBA.  What is even more perplexing is when I did contact the bank to ask whether they had any record of my contract or any material concerning its terms and conditions, I spoke to a very helpful officer who was interested in my situation where he made some enquires with the product department on my behalf. He later got back to me and told me this in part which I asked him to send to me: “I can confirm that the loan your customer is referring to was the Student Financial Supplement Scheme (SFSS) which began from Jan 1993 to Dec 2003. This was not a Commonwealth Bank product but an agreement that was created between the Commonwealth Bank of Australia and the Australian Government to support our student population with university/college fees and charges. Therefore there is no PDS (product disclosure statement) that is available for the customer to provide from the CBA.”  It would be interesting if someone were to challenge the legal basis of the loan with no evidence of a contract or its terms and conditions.Then if I didn’t make a contract with the bank as it was not their product, and they did not have to make a product disclosure statement – who the hell was I dealing with? I find this difficult to reconcile with the following from the Social Security Guide 1.2.7.40 on the Student Financial Supplement Scheme (SFSS):“For existing loans, a person’s loan repayment arrangements will continue unchanged. Students may make voluntary repayments to the CBA during the first 5 years of their loan contract. The Commonwealth Government will then buy-back the loans and collect repayments through the taxation system.”  ‘Buy back’? This suggests that the initial debt (chose of action) was with the CBA.  Anyway, I’m in the process of researching and gathering evidence to mount a possible case. One possible avenue, considering the length of time that has elapsed, is the constitutional question: is the government’s acquisition of the debt (from the CBA) “on just terms” under s 51 (xxxi) of the Constitution? The CBA would have been open to various causes of action when these loans were offered under s 52 of the then Trade Practices Act for deceptive and misleading conduct, or unconscionable dealing at equity. This matter would appear to still be a live issue if we can all get together on this.

May 25, 2016 - I’m adding my name to the long list of people who did what they thought was the only thing possible to get through studying. I took out one or two loans in the mid 90’s (1995? 1996?) and didn’t even complete uni because I had to work full time to survive. Yet I now have a debt worth over $35k. I don’t earn enough to be in the repayment bracket (I think I have once or twice in the past 20 years) and the debt keeps growing. How $7000 or $14000 can almost triple in 20 years is disturbing. I want this debt gone. My husband is worried that I’ll be forced to pay it back, but I tell him that the ATO can go and whistle for it until I die. However, it’s the principal of the thing. I only studied for 18 months at most but was talked into this loan by the CBA.  I’m up for any petition, class action, placard waving etc to get this damn debt wiped. I’ve paid at least $100k in tax since leaving full time study and will probably end up earning and paying another $500k or more in tax before I retire. Money grabbing pack of over paid school children….I’ll vote for the first pollie who includes the wiping of this debt in their policy propoganda…..

June 10, 2016 - I started reading these accounts and have realised I’m not alone. Last time I looked at my SFSS debt was maybe 2 years ago and it was $25k+ and rising -I’m sure. i took this scam loan out when I was 19yo for two years so I could live and study as a poor student. Ive never earnt the minimum income before repayments and I can’t see myself earning $54869 for 2016/17. If I started to make voluntarty repayments I wouldn’t even scratch the surface. I’ve probably earnt $20k this year as I’ve just returned to work as my kids are now at a good age. Sigh….if only I was more savvy back in 1995, I’d have choose to starved than have this debt hanging over my head like a noose with kids in toe, ahhh the benefits of hindsight. I don’t want my kids to be dragged into this probably too late. Should a class action arise I want to be part of it!

June 17, 2016 - Hi all. Yep i was a sucker too. I took out 3 studebt loans between 1995 to 1998 owing $21,000. The last count saw my debt at $35,000 even though ive been paying through taxes for the past 12 years. I too would be interested in any class action. Im not earning enough to even pay the yearly interest.

July 26, 2016 - I am another one who is suffering now from getting a SFSS 18yrs ago. I have this year, for the first time reached the threshold and been required to make payment.  I ‘traded’$60 f/n to get $120. Until now I had NO IDEA i was also required to pay back my own $60 that I had traded. How the heck do we get out of this nightmare?!?!

We are seeking for all existing debts to be waived and indexation (interest) to cease immediately.  The entire scheme requires evaluation to address how affected participants can be assisted. 

 https://www.theguardian.com/australia-news/2017/jul/05/students-who-forfeited-welfare-under-unfair-loan-scheme-owe-government-21bn



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