Prime Minister Tony Abbott has slapped down his Education Minister and ruled out collecting outstanding HECS debts from the estates of dead students.
Mr Abbott said on Thursday morning that the government was not going to change existing rules around HECS debts from the deceased.
''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.
His comments come after Education Minister Christopher Pyne floated the idea of collecting student debts from the dead as a way of boosting the budget bottom line.
Treasurer Joe Hockey also earlier on Thursday appeared to back the idea.
''It shouldn't be different to any other loan,'' he told the Nine Network. ''It's only against the estate of the individual. It’s not going to go across families and so on.''
Mr Pyne told Fairfax Media on Wednesday he had no "ideological opposition" to collecting debts from the estates of former students who died owing money to the government.
"[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 they are at the moment entitled to not pay back their HECS debt," Mr Pyne said.
Mr Pyne said safeguards would be needed to ensure the families of young deceased students would not be affected.
"For example you might want to have an age limit," Mr Pyne told The Australian Financial Review. ''This would ensure that families of people who died young owing a HECS debt would not be penalised.''
But Mr Abbott said ''the government is not going to change existing rules''.
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.
Labor, the Greens and the Palmer United Party are opposed to the government's plans to deregulate university fees and increase the interest rate on HECS debts. If these measures are blocked in the Senate it would hit the government's bid to return to surplus –making the politically-sensitive idea of collecting money from the dead more attractive.
The Grattan Institute estimates the policy, which was not part of the budget, could save up to $800 million a year.
Labor higher education spokesman Kim Carr branded the idea a death tax.
"The government is grasping for a distraction to its policies," he said. "This would cut to the core of HECS by introducing a death tax that may cost more to administer than it would raise in revenue.
''The idea of HECS is you only repay it when you are earning above the threshold."
Meanwhile, 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, said.
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.
And a student who earned an average 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 billion by the mid-2020s, it said.