Unique International College, based in Granville in Sydney's west, was also found to have breached Australian Consumer Law when it made false or misleading representations targeting students living in former Aboriginal missions in Bourke, Wagga Wagga, Walgett and Taree.
The college used door-to-door sales tactics between 2014 and 2015 to sign people up for its VET FEE-HELP courses that cost between $10,000 and $25,000, Justice Nye Perram said in his judgment on Friday.
After taking the matter to court, the Australian Competition and Consumer Commission has welcomed the Federal Court finding, with its chairman Rod Sims saying the college "took advantage of some of the most vulnerable and disadvantaged members of our community".
Unique misled potential students by making them believe the debt incurred by the VET FEE-HELP scheme was the same as being free, as they didn't have to repay it until they earned more than $50,000, court documents said.
The ACCC says free laptops were offered by Unique to the students as an incentive to sign up to the VET FEE-HELP courses, however, the court found it was misleading not to explain that each person who took the laptop would be left with a lifetime of debt.
"It was misleading to offer free laptops to groups of poorly educated and/or illiterate people on the basis that they sign up to VET FEE-HELP courses without explaining in the plainest of terms what the ramifications of this would be," Justice Perram said in his judgment.
Court documents say 36 per cent of Unique's enrollees in NSW were Indigenous, which is four times higher than the general VET population across Australia and its enrolment rate in low socio-economic areas in NSW was more than twice as high as the general VET population.
The matter will return to court where a decision on penalties is expected to be made.