Australian students owe £3bn in loans

Since a Labor government introduced Australia's unique "study now, pay later" scheme nearly 15 years ago, 1.7 million Australians have attended university and been charged only about a quarter of the tuition costs.

Figures released by the Australian Taxation Office show that more than 1 million current and former students owe A$9 billion (£3.3 billion) under Hecs. The interest-free loans enable students to defer their tuition charges until they graduate and are earning at least $24,000 a year, when they begin to repay the debt through a tax surcharge.

The Tax Office said more than 600,000 Australians had repaid their Hecs loans. But the amount owing is expected to reach $11.5 billion by 2006.

After the election of the conservative government of prime minister John Howard in 1996, Hecs charges were raised and universities were allowed to charge most postgraduates the full cost of their courses. The government introduced a loan scheme for postgraduates last year.

The proportion of Australians with university qualifications has almost doubled to 18 per cent of the population.

The Australian federal education minister Brendan Nelson is believed to be planning reforms that will enable universities to charge top-up fees for high-demand courses. The cap on the number of Australians paying the full tuition cost will also be lifted.

Currently, universities must limit full fee-paying students to 25 per cent of enrolments on any one course. This is expected to be doubled to 50 per cent. Those paying full fees gain admittance with lower entry scores than Higher Education Contribution Scheme-funded students, leading to claims the system meets the needs of the "rich but thick".