Students dive into pockets to beat HECS interest rise

Education Department secretary Tony Cook said many students had aimed to make voluntary repayments before the June 1 deadline to avoid paying more interest.

Mr Cook said the race to beat the deadline meant many paid more money than they would have otherwise.

"We know that students have been paying more up front than perhaps they intended to because they did see the indexation rates," he told a Senate estimates hearing on Friday.

Under the indexation change, a student with an average debt of $24,771 has to pay an extra $1759.

Education Minister Jason Clare said there could be merit in changing how HECS interest was calculated.

He said there was a good argument for changing indexation being applied to the original debt rather than the balance.

"That strikes me as not right," he said in Canberra on Friday.

Mr Clare said he ordered the team reviewing education reform to look at the issue.

The interim report will land on his desk next month. 

Assistant Minister Anthony Chisholm told a Senate estimates committee on Friday the HECS system wasn't intended to have students take decades to pay back their loans.

Senator Chisholm said while there were extreme examples of people paying off HECS well into their 60s and 70s, it wasn't designed for that to be the norm.

"We want as many people being able to go to university and we don't want the price to be a barrier," he told the committee.

"HECS, since its inception, has been a remarkable success."

The committee was told more than three million students in the country have a debt, with about 1.2 million of those making no compulsory payment.

But education department officials said some students faced a risk of overpaying their HECS repayments if they made financial contributions throughout the year.

Officials said there were no plans to expand measures to cancel the HECS debt of students.

Debt forgiveness measures have been put in place as an incentive for employment as a rural doctor or nurse practitioners.

Opposition education spokeswoman Sarah Henderson said the government had been "asleep at the wheel" on student debt.

"(The government) is driving up inflation ... this is why it's an issue because suddenly you've imposed this horrific increase in student loans and hitting so many Australians," she said.

Senator Chisholm said the government was focused on making tertiary education more accessible.

Wiping out HECS indexation, which the Greens are calling for, would cost the budget about $9 billion.

Mr Clare said the arrangements were better than a bank loan charging interest for a profit, pointing to the fact that even if the total bill goes up, repayments do not as they were tied to the person's wage band.

"The taxpayer lends you $1 and they get that dollar back at its real value," he said.

Asked about concerns a higher HECS debt could impact loan and credit assessments by banks, he said lenders took into consideration higher wages and earning potential.

"What you pay every year, every month, is based on your income, not based on the indexation and banks will take that into account as well," he said.