The federal government is bracing for a wave of refugee applications from 650 Libyan scholarship students marooned in Australia who fear torture at the hands of the Muammar Gaddafi regime when they return to their war-torn homeland.

The students, some of whom recently smashed a portrait of Gaddafi outside the Libyan embassy in Canberra, currently have their tuition fees paid by Libya and receive a monthly cash stipend channelled through the embassy. When their visas expire later this year, they fear the money will dry up and their residence in Australia will be declared illegal.

A spokesperson for the students, Hassan Zuwai, told Crikey that if the regime managed to quash dissent and maintain his grip on power, they would consider applying en-masse for political protection. He said those whose time in Australia was coming to an end were “really scared”.

“If this revolution drags on and we need to reapply for another visa, the regime’s not going to help us with the money,” he said, adding that the families of some students inside Libya had already suffered retribution and harassment after reports of the initial protests appeared in the Australian press two weeks ago.

“We’re going to be persecuted when we return, probably arrested and subjected to terrible treatment…we are going to ask the government to continue our education and hope that the [opposition] National Council will meet all the bills.”

Overnight, forces loyal to Gaddafi extended their grip over Libya, bombing rebels in the centre and west of the country.

Currently, the students receive $3,300 a month for a couple and $2,300 for a single student, with a similar amount provided to female students requiring male chaperones. Many of the students live in shared accommodation to save money. About 150 scholarship are at the University of Wollongong and others study at campuses including the University of Canberra, Edith Cowan University and the University of Western Australia.

While Libyan cultural attaché Omran Zwed has supported the students, the ambassador, Musbah Allafi, has been more hesitant and is currently engaged in high-level talks with Foreign Minister Kevin Rudd over his ostensible support for Gaddafi.

Zwed told Crikey that the embassy had enough temporary funds to pay the students but that the situation could change depending on events inside Libya. When asked whether he still supported the regime, he referred questions to his superior Allafi.

Trade consultant Philip Eliason, who has worked closely with the embassy to expand Australia’s commercial links with Libya following the withdrawal of economic sanctions over the last decade, said the situation would remain perilous:

“They’re probably well placed people and they’ll find it very difficult to go home.”

In the years before the explosion of dissent last month, Australian universities kept cosy ties with Gaddafi and his local cronies.

In a press release issued last April with the headline “Ties with Libya strengthened”, the University of Wollongong spruiked a “signing ceremony” attended by deputy vice-chancellor Joe Chicharo and Zwed. The institution currently has 150 Libyan students enrolled across the university and uni-precursor Wollongong College Australia.

In late October, a delegation of Australian academics travelled to Libya to spruik for officially sanctioned-business with the support of the newly-formed Libyan-Australian Alumni association.

According to a report in the Tripoli Post, the ceremony featured representatives of Edith Cowan University, Flinders University, Griffith University, Latrobe University, Macquarie University, Monash University, University of Ballarat, University of Canberra, University of Melbourne, the University of South Australia, the University of Southern Queensland, University of the Sunshine Coast, University of Tasmania, University of Technology Sydney, University of Western Sydney as well as Wollongong.

Australian Consul General and Senior Trade Commissioner for North Africa Tom Yates told the exhibition he wanted to strengthen “existing concrete education bilateral relations between Libya and Australia”.

“In the last month, more than 30 Australian universities exhibited here in Libya and it was a road show demonstrating what Australia can offer within the bounds of postgraduate and undergraduate courses available to interested Libyan students.

“The good relationship between our two countries has been well reciprocated and we expect even stronger links to develop with the help of Libya-Australian alumni association.”

A history of support for the regime can have disastrous consequences for educational institutions. Last week, London School of Economics director Sir Howard Davies was forced to resign after it was revealed LSE had banked £2.2 million to train Libyans connected to the regime.

Wollongong Vice-Chancellor Gerard Sutton assured Crikey the University was “working with the Libyan Embassy to ensure that the students are able to continue their studies and receive appropriate support.” Campus leaders had remained supportive and counselling was available on campus.

Meanwhile, the students are preparing to travel to Canberra on Friday to protest outside the United Nations building and to demand that the prime minister clearly condemn the regime for its recent atrocities. A petition will be presented urging support for the rebels’ interim administration. However, a source close to the students said momentum has tailed off following the initial actions as students become fearful over their future in the country.

A spokesperson for immigration minister Chris Bowen said the department was yet to received any specific enquires related to asylum but there were several options available to Libyan students, including applying for protection or extending their student visa.

Approaches would be assessed on a case-by-case basis:

“Given the current situation in Libya, there are a number of flexibilities built into migration legislation for Libyan student visa holders who find themselves in difficult circumstances. They should make contact with the department, with each case to be assessed on its merits.”