A Melbourne-based policy research group says lowering the salary threshold for higher education loan repayments could raise as much as $500 million towards the federal budget.
The Grattan Institute recommends graduates begin repaying government loans once they earn over $42,000 dollars per year, instead of around $54,000
It says too many student borrowers either don't repay what they owe, or are taking too long to clear their debts.
The Grattan Institute say nearly four-million Australians have taken out HELP student loans since 1989 - as a result - greatly expanding access to tertiary education.
It says in the 2014-15 financial year alone, the federal government lent students close to $8 billion.
The report titled "HELP for the future: fairer repayment of student debt" estimates 20 per cent of that won't be paid back to the Commonwealth and interest costs on outstanding debt amount to $200 million.
The report argues a major cause of the system's problems is that graduates who earn less than the current repayment threshold of $54,126 aren't making repayments, or are taking too long to do so.
Andrew Norton is the Grattan Institute's Higher Education Program Director.
"A large share of the debt at the moment probably won't be paid back. And there are a couple reasons for that. But the ones we focus on are the fact that the scheme has been expanded to diploma students in vocational education, and they don't earn as much as bachelor graduates. And the share of graduates working part-time, often as the second income earner in their homes has gone up as well, and they typically earn less than the current $54,000 threshold."
The report recommends lowering the yearly earnings threshold at which student loan repayments begin to $42,000.
The move, it says, could return around $500 million a year to the budget, reduce interest costs, and make the scheme more targetted towards people facing genuine financial hardship.
Education Minister Simon Birmingham says funding of university students had essentially grown at twice the rate of the economy.
In a statement, Mr Birmingham says he welcomes all ideas from the sector, experts and students on how to make university funding sustainable.
Andrew Norton from the Grattan Institute is expecting some news in the upcoming budget.
"I think it's reasonably likely there'll be something about the threshold in the budget. whether it's as low as $42,000, I don't know. But, I think everyone's doing pretty similar sums to us and arriving at pretty similar conclusions."
But there are concerns dropping the repayment threshold could hit those who can least afford it.
That's despite the fact the Grattan Institute says its modelling is designed to take effect at more than $20,000 over the minimum wage and social security benefits thresholds.
Sarah Hodge is a student at the Australian National University in Canberra.
"If you're only earning $44,000 a year and you're trying to pay for rent or other things as well.... My step dad, it's taken him a long time to pay his back. It sort of adds to people's worries."
The federal government last year introduced changes to recoup HELP debts from students who are living overseas.
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