Prime Minister Tony Abbott has ruled out collecting student debts from the estates of the dead, after his education minister said the government had no “ideological opposition” to the idea.
Pyne has compared debt obligations under a student loan to a mortgage loan, in the case of a borrower dying.
“(If) an elderly person passes away with a HECS debt, they wouldn’t be able to say to the bank, `we’re not paying back our mortgage’, yet (students) are – at the moment – entitled to not pay back their HECS debt,” he told Fairfax Media.
The Grattan Institute estimates collecting unpaid HECS-HELP debts from deceased estates could net the government $2.8 billion over the next three years.
But Abbott moved quickly to hose down concerns the government could pursue students debts beyond the grave.
“This government is not going to change the existing rules, and the existing rules in respect of university debt … is that they cease on decease,” he told ABC radio on Thursday.
However, Treasurer Joe Hockey earlier appeared to back the idea.
“It shouldn’t be different to any other loan,” he told the Nine Network.
“It’s only against the state of the individual. It’s not going to go across families and so on.”
Currently, any debts owed on the income-contingent loans are cancelled upon death.
It’s rare for people to die before paying off their student loans.
However, new modelling from Curtin University’s National Centre for Student Equity in Higher Education says the government’s plans to deregulate university fees and charge compound interest on student loans could mean students had debts for longer.
“Fewer students will be expected to pay off their debt in full in their lifetime,” the report, released on Thursday, says.
A student who graduates with a $50,000 HECS-HELP debt would have to earn an average of $80,000 a year to pay it off before retirement.
A student who earned an averages of less than $80,000 a year throughout their working life would still have a debt when they turned 70, the modelling shows.
The National Tertiary Education Union says the government is shifting debt and costs away from government and onto students.
HELP debt would rise about $53 billion in 2016/17 to more than $200 million by the mid-2020s, it said.
