The Australian government's decision to replace its system of "Start-Up" scholarships to help university students cover textbook and other costs with income-contingent loans is a major policy shift in student support that has been slammed for being "rushed" without consultation or public analysis.

"It is a major long term policy change which got just a line in a media release," said Andrew Norton, a higher education expert said at the Grattan Institute, a think tank. adding it needed further analysis.

Conor King, executive director of the Innovative Research Universities group, condemned it as "bad policy" enacted in a "rush" to save money for the government's education reforms. He said it will lumber with more debt the financially disadvantaged students who rely on scholarships. 

Beginning next year, new applicants for Start-Up scholarships will only be offered an equivalent income contingent loan, on top of the student's other postsecondary debt.

"We are wondering why there was no consultation when consultation makes good policy. It is a major policy shift," said Angelo Kourtis, the University of Western Sydney's pro-vice chancellor for students.

He said the change will hit poor families and that there were “pockets” of society that will be discouraged from going to university by rising debt levels.

On Sunday, the Australian Labor Party conference in Victoria passed a motion, proposed by Young Labor, calling for the Australian government to repeal all plans to convert the Start-Up scholarships into loans.

The idea of allowing students to use government's loan program to help fund limited expenses was floated by a government review in 2008. The review argued that while it was "conceptually attractive,'' it needed further review and analysis.

The Queensland University of Technology's equity director, Mary Kelly, said it was difficult to understand the government’s decision given its policy track record in seeking to the boost the participation for disadvantaged groups. “It seems to undermine and contradict all the really good things this government has done for low socio-economic status students,'' Kelly said.

The architect of the Australian loan program known as HECS, Bruce Chapman, supports extending the loans beyond tuition fees to cover other upfront costs for students, noting that HECS loans haven’t dissuaded students from studying. He has suggested that all students be allowed to access HECS loans to cover other expenses, up to a limit of $500-$1,000 a year.

But Kelly argues that student living costs are a welfare issue that should be covered by grants. And she fears that the government’s decision may in the future prove a precedent for shifting other welfare initiatives into loans.

“Whether it sets any sort of precedent for any other welfare payments or benefits is a frightening question," she said.

At the time of a 2008 review by the emeritus professor Denise Bradley, the National Union of Students had given qualified support for allowing students to access limited loans for expenses, but it now argues that debt levels are already too high and that needy students should to be supported by grants.

Norton said that “in principle” shifting the scholarships into loans was justifiable because unlike other welfare recipients dealing with a chronic disadvantage, students were hampered by what he said was usually a temporary cash flow problem that will be overcome by higher earnings once they graduate.

However he is wary of the additional costs it will place on the current loan system. Norton said that higher debt levels for individual students will delay repayments and perhaps increase the number of students who never earn enough to repay their debts through the tax system.