A senior legal expert has warned that former recipients of a student loan scheme, which targeted low-income students and led them to trade away their right to welfare benefits, have cause for a potential class action lawsuit. The Australian government has been attempting to recover approximately $2 billion in outstanding debt from over 140,000 former students who participated in the now-defunct student financial supplement scheme (SFSS).
The Coalition discontinued the SFSS at the end of 2003 after acknowledging its administrative burdensomeness and poor targeting. It was revealed that participants were effectively hit with hidden interest rate costs through forgone welfare support.
Deb Woodbridge, a former student and current advocacy advocate, is one such individual who expressed interest in taking out an SFSS loan. Since then, she has repaid more than $35,000 but still owes $17,200 as her debt continues to increase due to inflation. After the repayment threshold for SFSS loans was raised in 2019, Woodbridge now sees $200 deducted from her pay every fortnight – equivalent to approximately $5k annually.
According to our interviewed senior legal expert John Smithson: "There is certainly reason for those affected by this poorly executed loan scheme to consider mounting a class action against the Australian government." He further added: "Individuals like Ms. Woodbridge may not be alone in their struggle with these debts."
Despite discontinuing the program nearly two decades ago following criticisms on its impact on vulnerable populations seeking higher education opportunities and inadequately disclosed financial repercussions associated with participation — it appears many Australians are still grappling with lingering debts brought about by this ill-conceived initiative.
Woodbridge shared her personal experience stating: “I've paid so much already yet my debt keeps growing because I'm not able to get ahead of it.” She continued expressing frustration adding: “It's overwhelming and disheartening to know that I might never be able to pay this off completely.”
The potential class-action lawsuit could bring together thousands of former students who have been similarly impacted by the SFSS, shining a light on the consequences faced by those struggling with mounting debts resulting from a government-initiated loan scheme.
As more individuals come forward sharing their experiences involving the controversial student financial supplement scheme (SFSS), it remains to be seen whether such legal action will take place and what its implications may be for both affected borrowers and government accountability.