So far an estimated 7,000 students have lost out because of drug offences

Under the legislation, students can lose a year of eligibility for grants or loans for a first conviction, two years for a second conviction and can lose all their entitlement for a third offence.

The curbs are intended to make students aware of the consequences of drug taking - using a financial penalty as a disincentive.

And it is expected that the penalties will affect about 1% of young people seeking support from the federal education department.

But critics of the scheme say that this penalises the young people who are most in need of financial support and are most likely to drop out of education.

"It denies access to education to those who need it most. It is not a sound anti-drug policy," said Kristi Ringor of the United States Students Association.