The Turnbull government is considering the controversial move of collecting student debts from the dead, as well as increasing university fees, as it seeks to find higher education savings in the May budget.
Former education minister Christopher Pyne backed the idea of recovering HECS from deceased estates two years ago, but was quickly shut down by Tony Abbott to avoid a scare campaign on the sensitive issue. Labor slammed the idea as a "death tax" - even though most other loans, such as mortgages and credit card debt, must be repaid upon death.
Ending the HECS write-off from deceased estates worth over $100,000 would save up to $800 million a year, according to leading higher education analyst Andrew Norton.
Sources in the higher education sector said the proposal had been raised in recent discussions with Education Minister Simon Birmingham, who is under pressure to find substantial savings in his portfolio.
Asked if he was considering recovering HECS from deceased estates, Senator Birmingham said: "The costs to taxpayers of higher education over recent years have grown dramatically
"Since 2009, taxpayer funding for Commonwealth supported places in higher education has increased by 59 per cent as compared to nominal growth of GDP that has risen by 29 per cent.
Sources in the higher education sector say the proposal has been raised in recent discussions with Education Minister.
"Essentially, higher education spending has grown at twice the rate of the growth of the economy.
"I welcome all ideas from the sector, colleagues and students as I continue to consult widely on higher education reform."
Fairfax Media understands other options under consideration include:
Raising the caps on student fees so students pay an average 50 per cent of the cost of their education, up from 40 per cent currently.
Lowering the repayment threshold so that graduates pay back their debts sooner.
Abandoning a plan to extend direct federal government subsidies to private colleges.
Vice-chancellors expect the government to release a policy options paper for higher education within weeks, but are bracing for a tough budget. The deregulation of student fees and a 20 per cent cut in funding still remains official government policy.
According to Mr Norton, recovering HECS from deceased would affect mostly wealthy households where one breadwinner, usually a woman, returns to work part-time after having children. Because they earn less than the $54,000 repayment threshold, they die without repaying their student loans.
Limiting the change only to deceased estates worth over $100,000 would ensure recent, low-income graduates were not affected, he said.
"This is definitely something worth doing," Mr Norton said.
"Many people who die without repaying their HECS debs are in affluent households."
While the short-term contribution to reducing the deficit would be small, he said it would substantially reduce the debt not expected to be repaid over the long-term.
Labor higher education spokesman Kim Carr said: "The government is trying to slide through an election campaign without any scrutiny when they clearly plan to make students pay more for a degree."
Increasing student fees without full deregulation would boost revenues while neutering a Labor election campaign against "$100,000 degrees". Senator Birmingham said in a recent speech there is a need to "reconsider the balance between public and private contributions" to the costs of a university degree.
Ditching the extension of Commonwealth subsidies to private colleges - seen as politically unpalatable following scandals in the vocational sector - would save around $450 million over three years. Senator Birmingham is understood to be keen to pursue the expansion to associate degrees and other pathway programs.
Universities Australia chief executive Belinda Robinson said: "With an early federal budget confirmed and an election on the cards, it is crucial that all political parties spell out how they will deliver university funding and policy certainty.
"Despite repeated promises by the government of a public discussion on higher education policy options, the only policy on the table is billions of dollars in proposed cuts to funding for university teaching and research."
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