The federal government should collect unpaid debts from students after they die, a report by an influential think-tank has found.
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The Grattan Institute study showed that the government could collect about $800 million a year by 2017 if it recovered student debts from deceased estates and Australians living overseas.
The report considered a range of options for recovering “doubtful debt” – government money loaned to university students that is unlikely to be repaid.
“The amount exceeds a billion dollars a year, and is expected to grow significantly in coming years,” it said.
The report cites predictions that $7.1 billion of the $30.1 billion outstanding Higher Education Loan Program debt at 30 June 2013 will not be repaid.
The doubtful debt could reach $13 billion by 2017, the report said.
The report suggests its recommended changes apply to future students.
Students only begin repaying their higher education debt once their income surpasses a minimum threshold.
The government currently writes off HELP debts for students when they die. The report recommends the government reclaim student debts from deceased estates worth more than $100,000.
But Grattan Institute Higher Education program director Andrew Norton said deceased estates would generate little income in the short-term.
“This way will bring in very little actual cash in the near future but it will have a big accounting effect on the budget,” he said.
The report said doubtful debt was factored into the government's annual budget so improving the system for reclaiming that money would improve the financial position.
It also suggests a minimum annual repayment for Australians travelling or working overseas who are currently exempt from repaying their loans.
The report also recommends tying payment increases to the consumer price index.
Graduates of performing and visual arts and crafts are least likely to repay their debts in full, the report found. But commerce, education, nursing, science and humanities graduates contribute most to doubtful debt, once the large enrolment numbers for these courses are taken into account.
