AFCA Complaints Highlight Hardship Handling for Student Personal Loans
Australian students are experiencing increased financial strain, and student personal loans are becoming a major source of worry when it comes to repayment and hardship assistance. Despite taking out these loans to pay for their education, many borrowers discover that their lenders do not always offer sufficient support when they are having financial difficulties.
The way financial institutions handle hardship requests continues to provide difficulties, according to data from the Australian Financial Complaints Authority (AFCA). Personal loans generated 7,737 complaints in 2023–2024, making them the fourth most complained-about product nationwide, despite a 17% decrease in overall financial trouble complaints in 2024–2025. A significant percentage of these complaints concern borrowers who are having trouble making their payments and who are not receiving enough hardship assistance from lenders.
This problem is especially important in light of the federal government’s June 2025 20% reduction in HELP loan debts, which offers relief to many graduates but excludes private student personal loans, creating a support gap for those who depend on bank or finance company loans to pay for their education.
Understanding the Current Complaint Landscape
AFCA received 5,715 financial difficulty complaints in 2023-24. The previous year saw complaints involving financial hardship surge by 25%. This reflected cost of living pressures affecting Australian households. While numbers have since stabilised, AFCA maintains these figures remain “too high.”
Home loans accounted for approximately one-third of financial difficulty complaints. Personal loans represent a significant portion of the remainder. The most common issues identified include:
- Lenders declining hardship requests without genuine consideration
- Failing to respond within reasonable timeframes
- Continuing debt collection action after borrowers disclosed financial difficulty
Financial firms now face increased scrutiny regarding their hardship handling practices. The Australian Securities and Investments Commission has been undertaking reviews of hardship applications. This regulatory attention signals the seriousness of the issue.
HELP Loans Compared to Student Personal Loans: Critical Differences
Many students do not fully understand the substantial protection gap between government and private lending options. Government HELP loans offer income contingent repayments that only commence when earnings exceed $67,000 annually for the 2025-26 financial year. These loans are indexed to inflation rather than charged commercial interest rates. Repayments automatically pause when income drops below the threshold.
Private student personal loans operate differently. Fixed repayments typically commence immediately after the loan is disbursed. Interest rates generally range from 8% to 20% or higher depending on the lender and borrower’s circumstances. There is no automatic income-based protection. Borrowers must actively negotiate hardship arrangements when difficulties arise.
Students often require personal loans because HELP does not cover living costs or textbooks. Research indicates textbook costs alone average approximately $602 annually. Some courses at TAFE and private colleges are not eligible for government assistance. This pushes students toward private lending solutions. Providers such as CashLend offer options for students in these situations. Borrowers should carefully assess repayment capacity before committing to any loan.
Hardship Scenarios Driving AFCA Complaints
AFCA case files reveal troubling patterns in how some lenders respond to hardship requests. In one published determination, a borrower experiencing severe mental health issues repeatedly requested hardship assistance from their bank. The institution created persistent barriers and delays over several years. AFCA awarded $23,900 in compensation for stress and inconvenience resulting from multiple separate failures.
Another case involved a graduate whose casual employment ended unexpectedly. She contacted her lender immediately upon losing her job. She provided medical certificates and evidence of active job searching. The lender initially acknowledged her request but then issued a default notice just two weeks later without adequate explanation. AFCA found the lender failed to genuinely consider her circumstances and ordered the adverse credit listing removed.
Family violence situations create additional complexity in lending disputes. AFCA has examined cases where co-borrowers were coerced into loans without informed consent. In these circumstances, lenders must recognise vulnerability indicators and provide appropriate support pathways rather than pursuing standard collection activities.
Legal Rights: What Lenders Must Do
Under the National Consumer Credit Protection Act, credit providers have clear obligations when borrowers experience financial difficulty. Financial hardship refers to a temporary inability to make repayments due to circumstances such as illness or job loss.
Components of an Effective Hardship Request:
- Contact the lender as soon as difficulty begins
- Explain changed circumstances clearly and honestly
- Provide supporting documentation such as medical certificates or termination letters
- Propose a specific temporary arrangement
- Maintain written records of all communications
Many borrowers wait too long before seeking assistance. AFCA guidance emphasises that acting quickly preserves more options. Once arrears accumulate and default notices are issued, resolving situations becomes significantly more difficult. Lenders like CashLend and other responsible credit providers generally encourage early communication when borrowers face repayment challenges.
Navigating the AFCA Complaints Process
If a lender denies a hardship request or fails to respond appropriately, borrowers can escalate their concerns to AFCA. The service is free and designed to be accessible for all Australians.
The Complaint Process:
- Submit an internal complaint to the lender first
- Allow 30 days for their response
- If unresolved, contact AFCA at 1800 931 678
- AFCA reviews the case independently
- Binding determinations can be issued against lenders
AFCA can order various remedies including interest rate reductions and fee waivers. For complaints lodged after January 1, 2024, compensation caps at $6,300 per claim. Non-financial loss compensation recognises stress and inconvenience caused by lender failures.
Time limitations apply to all complaints. Generally, borrowers must lodge their AFCA complaint within two years of the issue arising. Special circumstances may allow extensions. Delays in seeking assistance should be avoided.
Prevention Through Informed Borrowing
The most effective approach remains avoiding unmanageable debt from the outset. Before taking out student personal loans, prospective borrowers should honestly assess their capacity to repay. This includes calculating total loan costs including interest over the full term. Consider whether part-time work income is realistic alongside study commitments. Explore scholarships and grants as alternatives.
Average MBA costs in Australia reach approximately $64,211. A five-year personal loan at typical interest rates significantly increases the total amount repaid. Understanding these figures helps inform better borrowing decisions.
Early warning signs that assistance may be needed include:
- Missing payments or consistently paying late
- Using credit for basic living expenses
- Feeling anxious about financial communications
- Avoiding contact from lenders
- Juggling multiple debts with minimum payments only
Recent Changes Affecting Student Borrowers
The June 2025 debt reduction provided significant relief for HELP loan holders. The government reduced all eligible student debts by 20%. For someone with a $27,600 HELP debt, this meant a $5,520 reduction.
Additionally, the minimum repayment threshold increased to $67,000 for 2025-26. However, these changes do not extend to private lending arrangements. Borrowers with both debt types face a complicated financial landscape requiring careful management.
Taking Action
If repayment difficulties arise, borrowers should contact their lender immediately to discuss hardship options. Documentation of all communications remains essential. Free financial counselling services can help negotiate with lenders and explain rights.
The complaint data demonstrates that some lenders are not meeting their obligations. AFCA exists to hold them accountable. Borrowers denied appropriate hardship assistance should not accept unfavorable outcomes as final. Rights exist and mechanisms are available to enforce them.
Financial difficulty during studies does not define future prospects. With proper support and clear understanding of rights, borrowers can navigate these challenges and protect their long-term financial wellbeing.
