'Debt from dead' bid fails

Australian Prime Minister Tony Abbott. Photo / AP

Abbott rules out making deceased estates liable for outstanding student loans.

Australian 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.

Christopher Pyne has compared debt under the Higher Education Contribution Scheme to a mortgage loan, in the case of a borrower dying.

"[If] an elderly person passes away with an 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 A$2.8 billion ($3 billion) over the next three years.

Treasurer Joe Hockey also appeared to back the idea.

"It shouldn't be different to any other loan," he told the Nine Network.

Abbott later 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 said.

Coalition frontbencher Bruce Billson revealed the Government is talking to Britain about recovering debts from workers overseas.

Currently, any debts owed on the loans are cancelled upon death.

It's rare for people to die before paying off their student loans.

Curtin University's National Centre for Student Equity in Higher Education says the Government's plans to 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 says.

A student who graduates with a A$50,000 debt would have to earn an average of A$80,000 a year to pay it off before retirement.

A student who earned an average of less than A$80,000 a year throughout their working life would still have a debt when they turned 70.

- AAP