The purpose of the ABSTUDY scheme is to address the particular educational disadvantages faced by Aboriginal and Torres Strait Islander people by improving educational outcomes to a level commensurate with the Australian population in general. ABSTUDY policy aims to encourage eligible Indigenous students to take full advantage of available educational opportunities and improve their employment opportunities.

Means tested benefits available as part of the ABSTUDY scheme are targeted to those most in need.

The Aboriginal Study Grants Scheme (ABSTUDY), the precursor to the current ABSTUDY scheme, was introduced in 1969 as part of the then Commonwealth Government's commitment to implement special measures to assist Australian Aboriginal and Torres Strait Islander people to achieve their educational, social and economic objectives through financial assistance to study.

ABSTUDY became available to Indigenous students in tertiary studies from the beginning of the 1969 academic year in response to the lack of participation of Indigenous peoples in higher education. Eligible full-time students received a Living Allowance, with higher rates applying to partnered students and where there were dependent children. Compulsory course fees were also paid, as well as a book and equipment allowance. Travel costs were paid for students who needed to study away from home.

Initially, the Australian Government clearly identified that primary and secondary education was the responsibility of the States and Territories. However, it became evident during 1969 that many Indigenous students were not eligible for entry to tertiary education, and hence for ABSTUDY assistance, because of the gap between the cessation of compulsory schooling and normal commencement of post-secondary education. Because of the low numbers of Indigenous students staying at school past the compulsory period, the scheme was extended to mature age secondary students to enable them to advance to matriculation studies and to gain entry into a tertiary course.

To promote the participation of Aboriginal and Torres Strait Islanders in secondary education so that they were able to continue on to tertiary studies, the Aboriginal Secondary Grants Scheme (ABSEG) was introduced at the beginning of 1970. In 1973, ABSEG was extended by Government decision to include all Indigenous students attending secondary school. This decision recognised that these Indigenous students needed additional assistance and encouragement prior to leaving school to realise their educational potential, as it was evident that many did not undertake senior secondary studies.

Further developments were mainly in the post-secondary area with extension of entitlements to Indigenous students undertaking short courses, assistance with tutoring and eligibility for students undertaking studies by correspondence.

It became apparent that many Indigenous students wishing to undertake post-secondary courses often lacked the necessary educational preparation to undertake post-secondary studies in formal institutions. Family commitments also prevented many others from leaving isolated communities to pursue studies. The schemes were therefore broadened to provide a wider range of opportunities, both in education institutions and through specially arranged courses provided for groups of Indigenous students.

In 1975 and 1976, ABSTUDY was extended to enable special courses to be established for Aboriginal and Torres Strait Islanders in remote areas who did not have access to the usual range of education and training opportunities. Where local experts were not available to run these courses, specialist instructors were brought in to the local communities.

In 1988, the two schemes were amalgamated into the current Aboriginal and Torres Strait Islander Study Assistance Scheme (ABSTUDY) which has two components, ABSTUDY Tertiary and ABSTUDY Schooling. A major revamp of the ABSTUDY scheme was undertaken in 1989 and 1990 following the introduction of the National Aboriginal and Torres Strait Islander Education Policy (AEP).

In December 1998, the Government announced changes to ABSTUDY to take effect from 1 January 2000, which intended to help target ABSTUDY benefits to those students most in need of assistance, and to address particular educational disadvantages faced by these Indigenous students. The decisions reflected many of the concerns raised by the Indigenous community that ABSTUDY be retained as a separate scheme and that the additional benefits available under the Youth Allowance (YA) were not available under ABSTUDY.

The changes brought ABSTUDY Living Allowance payments in alignment with those payable under the YA for 16-20 year old students. Indigenous students aged 21 years and over became eligible for the Newstart rate that is a higher rate of payment than students in receipt of the YA or Austudy payment. Students over 21 years of age became subject to a more generous partner income test than applied for Newstart recipients. The Pensioner Education Supplement was aligned with that payable under the Social Security Act 1991.

In July 2005, following an election commitment to extend the eligibility for Youth Allowance, Austudy and ABSTUDY payment to full-time Australian Apprentices, a means-tested living allowance for eligible Australian Apprentices under ABSTUDY was introduced.  The intent of the extension of assistance to Australian Apprentices is to provide extra help during the initial years of training while wages are generally at their lowest.

The amendments to the ABSTUDY Policy also exempted from assessment of income the value of Commonwealth Trade Learning Scholarships and Tools for your Trade initiative.

• encourage Aboriginal and Torres Strait Islander people to take full advantage of the educational opportunities available;
• promote equity of educational opportunity; and
• improve educational outcomes.