University students may have to start paying back their HELP debt sooner.

A Grattan Institute report has found that the government could claw back $500 million more a year more, and even more over time, if it lowered the income threshold that students start repaying their loans.

At the moment students repay their Higher Education Loans Program (HELP) and VET FEE-HELP loans once they start earning $54,186.

If this was reduced to $42,000, this would immediately increase the number of people repaying their debt by 50 per cent.

The report’s author Andrew Norton suggests that the HELP (formerly known as HECS) program has become unsustainable and without change, the ballooning cost would put teaching and research at risk of cuts.

The annual bill for HELP loans has reached $7.8 billion and 20 per cent is considered “bad debt” that will never be repaid. In 2014/15, this equated to about $1.6 billion a year.

“Interest subsidies on outstanding debt add $200 million a year to HELP’s costs, but would be five times higher if interest rates return to previous levels,” Mr Norton said in a statement.

Education and Training Minister Simon Birmingham acknowledged the problem when asked whether the government would consider the proposal.

Education Minister Simon Birmingham. Picture: AAP/Lukas CochSource:AAP

“The costs to taxpayers of higher education have, over recent years, grown dramatically,” Mr Birmingham said in a statement to news.com.au.

This was partly driven by the removal of caps on the number of students allowed to study at public universities in 2012. The introduction of the “demand driven” system allowed more students to study at universities.

Mr Birmingham said taxpayer funding had increased by 59 per cent since 2009, compared to 29 per cent growth in nominal GDP over the same period of time.

“Funding of university students has, essentially, grown at twice the rate of the economy.”

The government is also considering collecting student debt from those who have died and leave estates worth more than $100,000.

“I welcome all ideas from the sector, experts and students on how to make university funding sustainable as I continue to consult widely on higher education reform,” Mr Birmingham said when asked about the reforms.

Mr Norton said a major cause of HELP’s problems was the growing proportion of graduates who work part-time.

Many students will never pay off their university debt.Source:News Limited

“But most part-time jobs earn less than the current threshold,” Mr Norton said in a statement.

Adding to this problem is the fact that students completing courses at TAFE and other vocational courses are also now eligible for HELP loans, and these students are even less likely than university graduates to earn enough money to start repaying their loans.

The federal government planned to extend VET FEE-HELP to private colleges but there were reports this could be dropped.

However, when asked whether the plan would be dropped, Vocational Education and Skills Minister Scott Ryan said the Coalition would redesign the VET FEE-HELP scheme for 2017, following extensive consultation with the sector.

“We have already taken more than a dozen measures to crack down on vocational education providers who are flouting regulations and acting unethically,” Mr Ryan said in a statement.

“The VET FEE-HELP scheme, introduced by Labor, was demand driven, uncapped and had insufficient student protections in place.

“The original scheme opened the floodgates to shonky training providers and predatory brokers to take advantage of the system.”

He said the Coalition was committed to redesigning the VET FEE-HELP system to better serve the needs of all Australians.