Financial supplement debt has become a significant concern for many Australians. Dennis, for example, says his student financial supplement scheme (SFSS) loan over a decade ago was less than $10,000. The loan has ballooned to over $36,000 today.

SFSS, a type of financial supplement debt, affects the financial lives of over 100,000 Australians today. If you’re one of them, below are strategies for managing it.

 

What is Financial Supplement Debt

Financial supplement debt is a type of government-backed loan program designed to assist individuals in completing further training or study. These loans can be used to cover various education-related expenses, including tuition fees, textbooks, and living costs.

This can be:

• HELP or Higher Education Loan Program. This is Australia’s primary student loan scheme, providing funding for those completing their undergraduate or post-graduate education.

• VSL or Vocational Student Loan. This loan is available to eligible students pursuing certain vocational education and training courses.

• SFSS or Student Financial Supplement Scheme. This loan program is designed to assist tertiary students whose parents fell below a certain income threshold.

• SSL (Student Start-up Loan) and ABSTUDY SSL. This loan program is specifically designed for Aboriginal and Torres Strait Islander students and apprentices.

• TSL or Trade Support Loan. A loan program that assists individuals doing a Certificate III or IV leading to certain trade occupations.

 

What To Do When in Financial Supplement Debt

Once your income reaches a certain threshold, you must make compulsory repayments on your financial supplement debt. As of June 2024, the minimum sits at $54,435. 

The repayment rate varies depending on the threshold you fall into. The rate for each threshold grows by half a per cent, except for the initial two thresholds, which have a more significant increase from 1% to 2%.+

This table from the Australian Taxation Office outlines the portion of your income that goes to the compulsory repayments.

While the initial repayments may appear modest, the loan amount is subject to indexing, meaning it can rise in line with inflation as measured by the CPI. If you have other existing debts, this can be overwhelming. The following section has tips to get out of debt.

 

Managing Financial Supplement Debt And Other Debts

Budget and Plan

Create a detailed budget to track your income and expenses meticulously, identifying areas where you can reduce spending. Prioritise debt repayment by allocating a significant portion of your budget to it, focusing on high-interest loans first. 

Then, set realistic financial goals, such as paying off a specific debt within a certain timeframe, and stick to your budget and goals no matter what.

Consolidate Debts

If you can, consolidate multiple debts into a single loan to simplify your repayments. But note that debt consolidation comes with risks, so be aware of them. Do your research properly to ensure this process will help you regain financial stability and not otherwise.

Avoid Further Debt and Debt Traps

Minimise your reliance on credit cards to avoid accumulating more debt. If possible, cut up your credit cards or only use them for emergencies. 

Be cautious of loans with high interest rates, as they can quickly escalate your debt burden. Avoid predatory lending practices and debt traps that can worsen your financial situation.

Ask For Government Assistance

The government has financial assistance programs if you’re facing financial hardship. Moneysmart has a detailed list of numbers you can call for urgent help with money.

Seek Professional Advice

Consult a financial counsellor or debt specialist who can provide personalised guidance and develop a tailored debt repayment plan. Consider seeking credit counselling services to learn about debt management strategies and negotiate with creditors.

 

Debt Solutions With Debt Negotiators

Debt Negotiators offers various services to help you get out of debt, starting with an impartial, free debt assessment. From here, we can help you create your budget and debt management plan. Contact us today.