‘It’s obscene’: ATO still chasing $2bn in student debt from controversial 1990s loan scheme

The Australian government is still chasing $2bn of debt from more than 140,000 former low-income students who traded away their right to welfare under a loan scheme more than two decades ago.

The student financial supplement scheme (SFSS), which operated for a decade from 1993, enticed tertiary students to take out "low-cost" loans by giving up benefits including youth allowance, Austudy or the pensioner education supplement.

Every dollar of welfare a student gave up entitled them to $2 in a loan, which could be used to help cover expenses while studying. Minors were also able to take out loans.

The Coalition dumped the scheme at the end of 2003, acknowledging it was saddling students with high levels of debt, was "administratively cumbersome and poorly targeted" and effectively hit people with hidden interest rate costs through forgone welfare.

It also conceded that many of the students would struggle to ever pay the money back. When the scheme was axed, the government actuary estimated about 50% of the loans would be recovered.

In 2017, Guardian Australia revealed that, four years after it was dumped, more than 150,000 people still owed around $2.1bn in debt.

Six years later, the dial has barely shifted.