‘We got educated and exploited’: Nadia Sheriff’s $35,000 loan has only reduced to $32,800 after 20 years

As a teenager in the 1990s, Nadia Sheriff remembers seeing posters plastered around her university campus.

"Don't have enough food to eat?" they blared. "Can't cover the basics?"

The posters offered an enticing solution - a quick loan to fund student expenses while she was studying that could be paid back when she was working full-time.

But after almost 20 years of repaying her debt, Sheriff's $35,000 loan has only been reduced to $32,800.

Although the student financial supplement scheme (SFSS), introduced by Labor, was dumped 20 years ago, recipients - many of them now in their 40s and 50s - are still struggling to pay off the debts they racked up. Last week Guardian Australia revealed the federal government was still chasing $2bn of debt from more than 140,000 former low-income students like Sheriff who borrowed under the scheme.

And the problem is set to get worse, with quarterly consumer price index figures released last week showing Australians with student debt are facing the highest increase in decades when indexation is added on 1 June.

MPs and advocates have urged the government to reform the repayment system. Meanwhile, students including Sheriff are calling on the federal government to ease the growing pressure on them, decades after they took a loan that was meant to help.

The SFSS operated for a decade from 1993, enticing tertiary students to take out "low-cost" loans by trading away their right to welfare, including youth allowance, Austudy or the pensioner education supplement.

Every dollar of welfare a student gave up entitled them to $2 in a SFSS loan, which could be used to help cover expenses while studying. Minors were able to take out loans without their guardian's authority, and were able to receive up to $7,000 at a time.

Sheriff, who was the first in her family to go to university, says it didn't cross her mind at 17 that to receive the maximum $7,000 loan under the scheme, she'd have to trade in $3,500 of her Austudy, money she was entitled to receive from the federal government. The $3,500 then became debt indexed in line with inflation that she would have to pay off. She took the loan five times, racking up $35,000 worth of debt.

Brad, who asked not to give his full name and who considers himself one of the "victims" of the SFSS loans, says maximum payments were granted with no assessment of capacity to pay.

"Only the poorest kids took them up because it was such a sham. The most vulnerable were hoodwinked by the government," he says.

Brad took out three loans in the late 1990s as a teenager, amounting to $17,000.

"I've paid back approximately $10,000 and my current amount owed is $13,325 and growing," he says. "I had zero idea what I was signing up to. None."

Jen, who also would not give her full name, says she was a "naive 18-year-old" when she borrowed $31,153 over a six-year period in the 1990s.

Jen has paid back $24,466 towards her student debt but still owes more than $21,000. She says the scheme appeared to come with a "lifelong debt sentence".

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.

At the time, it was estimated up to 50% of loans would never be repaid.

Twenty years after the scheme was dumped, there's a renewed push to abolish indexation - and combat the growing debt.

Last year, the Greens introduced a bill abolishing indexation on education and training loans and raise the minimum repayment threshold for student loans. Senator Mehreen Faruqi, who introduced the bill, said the SFSS scheme was "cruel" and "targeted some of the most vulnerable in our society, including minors".

"It is an abomination that people continue to have to pay their SFSS debts, despite the scheme being acknowledged as fundamentally flawed by government," she said. "The blunt reality that people suffering under this historical scheme will never be able to pay back these debts highlights the need for all debt under the scheme to be wiped completely. This is what should have been done back when the SFSS was axed."

In a submission to a recent Senate inquiry into the bill, Sheriff called on the federal government to ease the pressure on SFSS recipients. The bill was knocked back this month.

The National Union of Students, which campaigned against the SFSS scheme when it was first enacted, is also pushing for indexation to be abolished.

"It's just ridiculous," president Bailey Riley says. "It's put students further in debt and a massive burden to save for anything.

Sheriff has found herself in tears to the tax office trying to negotiate repayments of her seemingly never-ending loan. She's now made the tough decision to incorporate her remaining debt into her home loan.

"It stings to have to carry this for another 30 years, but the impact that it's having on my annual tax return and my take-home pay isn't worth it any more," she says. "It's brought me shame and sleepless nights, even though I did nothing wrong.

"The government said the scheme was designed to support those on the lowest incomes to become educated but, sadly, we got educated and exploited at the same time. We've paid our dues and then some."