What Is Financial Supplement Debt?

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Like students in the United States, millions of Australian students utilize loans to pay educational expenses. The Australian government handles and manages some of the most widely used higher education loan programs. The financial supplement loan program ended in 2003. When the government terminated the program, it didn't cancel the financial supplement debt that the borrowers owed.


History of Financial Supplement Debt

The Australian Government began offering the Student Financial Supplement Scheme loan in 1998. Initially, the program targeted three categories of students. Within these groups, two categories had age-specific eligibility and one was set-aside for persons with disabilities. The existing Youth Allowance targeted persons under 25 years old, while Austudy payments went to students who were already 25 and older. The Pensioner educational supplement targeted the disabled who qualified for payments from the Australian pension system.


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Starting in 1998, the Australian government gave students in all three categories the option to double the amount of the educational allowance payments that they received from the Australian government by switching to the SFSS loan. Its maximum was $2,000 Australian dollars annually. These students were not limited to one loan program if they met income requirements that let them qualify for allowances under one of the three study options.


Students received their loan allowance twice a month, not in a lump sum. Once students qualified for the SFSS program, some eligible students received supplementary funding for living expenses such as rent and commuting costs.

Study Options for Loans

Students eligible for Youth Allowances, Austudy or Pensioner education supplement payments had a choice of how to use their FSS loans, depending on their age and their career interests. However, the courses and the institutions that they could enroll in required approval of the Australian government. The education options ranged from secondary school to graduate education.


The government put limitations on Austudy borrowers' use of their loan funds. Students with doctorates were ineligible for Austudy funding. Pensioners could not use the SFSS loan if they had previously completed master's or doctorate degrees.

Approved training options included high school, apprenticeships, tertiary and vocational training courses for careers. Students could use their loans to pay for a preparation course for tertiary education and for English as a second language studies. The Australian Department of Education's website provided details about approved institutions and eligible paths of study for loan recipients.


SFSS Program Features

The government of Australia restricted SFSS loans to residents who were currently living in Australia. By meeting certain requirements, these student borrowers only needed to apply and be accepted into apprenticeships or eligible courses and meet the age requirements.


Generally, the program required that students eligible for youth allowance, Pensioner education supplements or Austudy enrollees take full-time studies. However, Youth Allowance students could use the loan program if they could not take more than 66 percent of a normal course load because of scheduling conflicts, lack of prerequisites or similar circumstances. Pensioners and Austudy borrowers were eligible for part-time studies at a 25 percent level of full-time in some instances.


Financial Supplement Debt Contracts

The Australian government let students defer loan repayments while enrolled in authorized courses at selected educational institutions or in apprenticeship programs. The SFSS borrowers were required to make voluntary payments to the original lender, the Commonwealth Bank of Australia for the first five years. However, the government paid all loan balances at the bank when the government canceled the program. All the borrowers now owe any outstanding balances to the government, with the stipulation that the Australian government set repayment amounts for future payments, based on income.


Loan Payments for Outstanding Balances

The government encourages previous SFSS borrowers to make voluntary payments on their income-contingent loan debts through the Office of Taxation. SFSS loan repayment for the financial supplement debt is mandatory. Students who have outstanding debt and don't pay voluntarily get notifications from the Australian Tax Office, if their taxable income meets a specific threshold. The students whose income doesn't fall below the threshold are subject to involuntary withholding actions through their employers' payroll.


Income Thresholds for SFSS Payments

The SFSS loan repayment amounts for each borrower differ. They depend on the total owed and the former student's current income. The Australian Tax Office establishes and publishes the income thresholds annually.


Only those borrowers who fall below the threshold can get an exemption. However, the exemption is only valid for the current financial year. The same regulations apply to repayment of HELP debt and other education and training loans from the Australian government.

The income that the ATO includes in its calculations includes taxable wages, net rental income, certain taxable benefits and income from employment outside the country. The lowest income tier of less than $45,881 AUD is exempt from SFSS repayment in 2019. At $45,881, borrowers start to have an obligation to pay one percent toward their balance. The payment percentage tiers increase initially by one percent between the first paying tier and the second. Higher income levels range from 2 percent at $52,974 AUD through 10 percent for an income of AUD $134,573, increasing by one half of one percent thereafter.

SFSS Program Payment Increases

ATO's 2019 SFSS repayment rates are higher after their consolidation with other education loan programs on July 1, 2019. In 2018, incomes below $51,957 were exempt. The first tier paid two percent on income between this amount and $64,306. The repayment rate for the highest tier was only four percent for income of $91,426 or higher.

In 2017, incomes below $55,874 were exempt. A repayment rate of two percent was due with incomes above the exempt amount, up to $68,602. At the highest income tier, the 2017 repayment rate of only four percent was due on incomes of $97,378 or more.