The Federal Circuit Court has ruled that applicants for student visas who intend to rely on bank loans to pay for their living and school costs do not need to provide evidence that they have had regular income sufficient to accumulate the loan funds.

Although the decision – Saji v Minister for Immigration & Anor (2015) FCCA (7 May 2015) – was handed down in the context of an appeal against the refusal of an application for a subclass 572 (Vocational Education and Training Sector) student visa, it has broad applicability to other types of student visas for which evidence of the availability of funds to meet these expenses is also required (e.g. subclass 570 (Independent ELICOS Sector); subclass 571 (Schools Sector); subclass 573 (Higher Education Sector), etc.

If this case is a representative example of the administrative practices that the Department has been following, and the Department has in fact routinely been requiring student visa applicants who are planning to finance their costs through bank loans to show that they have had regular income to accumulate funds in the amount of the loans – then the Department has been misinterpreting and misapplying the regulations!

Consequently this decision has the potential literally to “revolutionize” one significant part of the process of applying for and obtaining student visas.

The Court’s decision in the Saji case resulted from its analysis of the requirements ofSchedule 5A of the Migration Regulations.  It is a common criterion for student visa applications that the applicant must provide the Department with evidence that they meet the requirements that are imposed by Schedule 5A to show that they have sufficient funds to pay for their school and living costs.

The requirements of Schedule 5A are again stated in similar terms for the different types of student visas – namely, the applicant must demonstrate that she or he has sufficient funds from an “acceptable source” to meet the relevant costs. The term “acceptable source” is defined in the Schedule 5A to include: ”a loan from a financial institution made to, and held in the name of, an acceptable individual” – in other words, the source of funds can be a bank, and the funds can be held in an account held in the name of the applicant.

There is a requirement in Schedule 5A that is, once more, common to many classes of student visas, that an applicant produce “evidence that the regular income of any individual (including the applicant) providing funds to the applicant was sufficient to accumulate the level of funding being provided by that individual”.

It was this requirement that caused difficulties for the applicant, both before the Department and on appeal against the Department’s refusal of her student visa application to the Migration Review Tribunal.  The applicant was able to show that she had secured a loan from a bank in India to pay for her school and living costs.  However, she was unable to show that she had previously had a regular source of income that would have enabled her to save the funds in an amount equivalent to the bank loan.  Consequently, the Department refused her application and the MRT affirmed the refusal of her visa.

On appeal, Judge Jarrett of the Federal Circuit Court held that the Department and the MRT had essentially gotten it “all wrong”.

Judge Jarrett closely examined the wording of Schedule 5A and concluded that the requirement to show that the “person” who is providing the funds has had a regular source of income sufficient to accumulate those funds applies only in cases where the “person” is an “individual”.

Judge Jarrett noted that the term “individual” is not defined either in the Migration Act or in the Regulations. However, the term is defined in the Commonwealth Acts Interpretation Act 1901 to mean only a “natural person”.  Judge Jarrett concluded that the bank from which Ms Saji had obtained the loan to fund her school and living costs was obviously not a natural person, and was thus not an “individual” for the purposes of Schedule 5A.

On the basis of this analysis, Judge Jarrett held that the MRT had committed “jurisdictional error” by taking into account an “irrelevant consideration” – whether the applicant had had a regular source of income sufficient to accumulate funds in the amount of the bank loan.  Under Judge Jarrett’s ruling, the question of whether the person providing the funds to be relied upon has had an adequate source of regular income in the past simply does not arise when the source of funds is an entity other than a “natural person”, like a bank.

The significance of Judge Jarrett’s decision is that student visa applicants who have gotten bank loans to finance the costs of their educations simply do not have to demonstrate that they have had a previous source of regular income to accumulate those funds. All they have to do is show that they do hold funds from the bank in an amount adequate to meet the relevant expense level for their costs.

The decision thus eliminates a substantial obstacle that has stood in the way of student visa applications.